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Real Estate ArticlesShould You Pay in Cash?
For many of us here, paying in cash is just not an option. Not everyone is really that affluent enough to release that much money in one go. But what if you do have enough money in order to pay for that home in cold cash? Should you go with it, or should you stick with getting a mortgage?
Conventional knowledge will tell you to still get a mortgage instead of paying in cash. Among the reasons given for this position are: you get tax deductions for mortgage payments; you get to put your extra money in investments that will bring you better returns; and you get to actually own your house instead of putting yourself at the mercy of your bank. In truth, every case should be treated differently because not everyone's experiences are the same. Regarding the investment reasoning, it all depends on the assumed amount of interest that you will get in return. If you are young and a risk-taker with a long-term investment horizon, an outlook of 9% return every year certainly trumps interest payments for a home loan of 6% annually. On the other hand, if you are conservative with a short-term outlook, you are better off paying in cash because your wealth will just get eaten. Another not-so-good thing about paying cash for your home is that you become less liquid. This is all well and good if you are very liquid with your finances, but if you only have enough, it is better to just take on a mortgage. Selling a home these days can be very difficult, so you can't expect to turn your home into cash should you need it immediately. But it does have its merits. Aside from the good things about paying in cash mentioned above, also do note that it is difficult to take out a reasonable loan these days. If you do not have a credit history, this is even the more difficult. If you have reasonable savings, then just pay in cash. You don't want to pay for the interests of a very ugly loan. You can talk about... Should You Pay in Cash? Tags: • investments • payments • home loan • extra money • tax deductions • credit history • selling a home • mortgage • tips • how to • pay cash • mortgage tips • cash for house • Related articles:
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