Whether you’re new to the real estate scene or you have done property transactions before, keep in mind that the financing part of this transaction is always the first stage of the process that needs mindful plotting out. Knowing how much house you can afford forms only part of the entire financial planning. Before funds start rolling out, you need to determine which payment setup will work best for you.
There are two ways by which you can pay for the home you purchase: via cold cash or via mortgage. Here are several tips on making this particular choice as you buy your preferred real estate:
- Consider your long-term financial goals. Whether you’re thinking of purchasing multiple properties or saving for college/your retirement/life in general, it’s worth listing down your goals and considering your options. Your payment choice should work with your future plans.
- Make sure all real estate-related budgetary concerns will be covered. Whichever payment option you choose, also take into account other related fees like closing costs, property taxes, repairs or refurbishments, and other immediate payables. If there are still leftover funds post-payment, confirm with your agent if that’s enough to cover expenses right after the turnover.
- Check the market for ups and downs. Keep updated on the market climate in the area where you plan to move. That way, you can use this knowledge as leverage during offers and negotiations. Apart from knowing whether you’re entering a seller’s market or a buyer’s market, keep track of other market indicators, as well, such as interest rates or median home prices. Staying informed on these could make a big difference in your choice as you could end up with more money left in your pockets after payment.
- “Value for money” is key. Take the strategy of seasoned investors who may sometimes opt to buy properties using home mortgages even if they could buy one immediately with cold, hard cash. That’s because there are instances where it’s smarter and easier on the wallet to get a mortgage than to pay for the whole shebang in one sitting. The one where you get the most value is a clear choice.
Listed below are the basic benefits of paying in cash or getting a mortgage in buying your preferred real estate:
Benefits to paying with cash
Get ahead of other buyers
Cash payment is generally preferable in any purchase, which is often accompanied by a nice discount on the final price. The same applies to buying real estate, especially since this means sellers can close the deal faster. This could give you an advantage over competing buyers who offer a higher price but in tranches.
Do away with loans and the banks
As convenient as lenders can be, there’s no question that they’re an additional cost, as well as time spent. Doing away with the need to wait for a lender’s approval, the purchasing process runs more smoothly for both the buyer and the seller.
Save on interest expense
Mortgage rates may vary depending on the loan you choose. Fluctuations are to be expected. Moreover, not even real estate market experts can precisely predict when this indicator will make a sudden swing. This is a fee that one is better without, along with other expenses that you can avoid when you purchase your property with cash.
Benefits to getting a mortgage
Diversify your investment portfolio
Instead of placing all your financial eggs in one basket — in this case, investing a considerable amount of your savings on real estate property — it would be wise to broaden your investment portfolio and place the rest of your money into other promising markets like bonds, stocks, or mutual funds. That way, you got your assets covered even if one investment doesn’t do that well. But if they all do then you have a windfall of profits in one fell swoop.
Make timely payments to improve credit score
This positive finance-related behavior will certainly reflect on your credit score. And an improved credit score translates to more windows of investment opportunities as you build your personal fortune.
Take a tax deduction
A particularly useful tip for homebuyers is to check on tax deductions for mortgage payments. You can write off up to $750,000 of your mortgage interest, including late fees, prepayment penalties, or interest payments before selling your property.
The world is your oyster when it comes to deciding how to spend your hard-earned savings. If you’re planning to buy real estate in the near future, spend the time to consider all your options.
Need more real estate advice? You’ll find more resources here or simply get in touch with the professional team of real estate agents from RE/MAX Direct, dedicated to helping you find the perfect property in Southeastern Pennsylvania. Reach us at 610.430.8100 or email us at remaxdirectwc(at)gmail(dotted)com.