There is a common belief that having debt is bad, so people think that buying a home with cash to avoid debt is the smartest choice. There are several factors that need to be considered before making a decision on how to proceed.
Buying a property with cash can circumvent certain additional costs such as interest, closing fees, appraisal charges and more. Cash buyers can purchase a property at a lower price and get a cash discount. In addition, the cash buyer’s home is not borrowed, making it easier for the homeowner to sell the home, regardless of market conditions.
Conversely, obtaining a mortgage can also have significant benefits. Even if the buyer can afford to pay for the house in cash, it may not be sensible for them to tie-up all their money in the purchase of a property as their financial circumstances may change at a later date.
We know these basic facts: cash is valuable when used for investments, and loses its purchasing power by 3-8% a year due to inflation. A property is an investment which usually gains value over time and can be a buffer against inflation, or enable you to make revenue from renting. On the other hand, if you choose the right property and the right mortgage, the property can pay for itself.