Paying Cash Versus Financing a New Home

​It’s the magic question—which is better? Should you pay cash on that new property, or should you take out a mortgage and finance? This match-up is not as straightforward as it may seem, and throws many investors for a loop when the time to close arrives. Both routes have some benefits and disadvantages. Whether you are a first time homebuyer or someone who has the cash sitting in the bank to purchase your first investment property, you will want to make the choice that is the most beneficial to your unique situation. Here is some information on paying cash versus financing a new home in the world of real estate in Henderson, Nevada.
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The 4-11 on Buying with Cash
Most real estate investors and the ultra-affluent prefer to purchase property with cash. However, some of the most famous billionaires, such as Facebook’s creator, Mark Zuckerberg, still take the very normal route of financing a home. A great deal on a rock-bottom mortgage rate is hard to pass up. Most people cannot afford to purchase a home with cash out-right, and have no other option but to finance a home loan.
 
There are a few advantages to buying a home with cash versus financing. For starters, when you pay for a home with cash, you avoid paying interest on a loan. This means that you purchase your home for cheaper than you would if you paid for it over a period of time. You will also have the luxury of avoiding paying for principal. There are still some recurring costs to consider, such as HOA fees and homeowner’s insurance. While insurance is optional if you pay with cash and own your home outright, it is still highly encouraged.
 
Having the cash to buy a home gives you an upper hand when negotiating your offer. Most other potential buyers will more than likely be looking to finance a home, making you the more appealing buyer—even if your offer is lower.
 
Perhaps the biggest perk to buying a home with cash is that you will not have the added stress of dealing with a bank or lender through the home buying process. If you have some potential roadblocks that could prevent you from securing a loan, such as bad credit or foreign nationality, this is a huge benefit.
 
Taking Out a Mortgage
The more traditional route of buying a home is to finance and take out a mortgage. Since most do not have the cash, this is a necessity rather than a choice, but it is one that has served most well. You will be paying a good bit of interest on a mortgage—in upwards of hundreds of thousands. The good news is that most of this interest can be written off on your taxes. It can be difficult to secure a mortgage, so be sure to shop around with lenders before you start looking for your next place.
 
If you would like more information on buying and selling real estate in Henderson, Nevada, visit our residential sales and marketing page or contact a representative with First Federal Realty DeSimone today.