Home Purchase: Cash or Mortgage?

Mortgage Company in PortlandBuying a home and in full cash doesn’t just make you an attractive buyer. It also puts in a better place to bargain, while giving you an edge over others. It is a known fact that many home sellers love cash, and there are many other benefits like avoiding the burden of a mortgage application process and monthly loan payments.

This doesn’t mean, however, it is always superior to buying using a mortgage. Obtaining a loan to buy a house has its own rewards. The benefits, according to mortgage companies in Portland, can go beyond providing finances when you can’t pay in full cash.

Eating Up Savings

Paying in cash means tying most of your finances in a home purchase. If the money required to purchase your dream house will take up most of your savings, it is likely to affect your financial situation in the future. While paying in full cash means that you will never have to worry about monthly payment and interests, it is still better to have enough money for the future and emergency expenses.

Giving Up Liquidity

Purchasing a home with cash is only advisable if it will not eat up your emergency funds or savings. This because using full cash means sacrificing liquidity (how fast you can get a cash out of an investment). Homes may take several months to sell, so you can’t get immediate money whenever you need it. It is much better to pay a larger down payment and buy using a mortgage.

No Tax Benefits

Mortgage payers receive tax deductions, which makes the loan a great way to finance a house. Without a home loan, however, you will need to carry the burden of tax implications. In case you face a big debt in the future, this can also negate homestead exemption.

While paying in cash seems like the better option, you also have to consider the potential downsides. Make sure that it will not empty out your savings, leaving you with little to no emergency fund. Taking out a mortgage and paying a sizable down payment (20%) can be an attractive solution.