Buying a Home: The Difference Between Cash vs. Mortgage

There's no doubt that the thought of buying a home without debt is an attractive one. If you have the funds available, it might seem like the best financial plan. However, there are some drawbacks that you'll want to consider before sinking a large amount of cash into a new home.


These are some of the differences between your two options.


Paying in Cash


The obvious benefit of paying in cash is that you won't have debt after purchasing your home. That means no loans, no interest to pay each month, and less fees throughout the home buying process. As a house buyer, that can make a lot of financial sense.


Paying in cash can also make you a stronger buyer in the eyes of sellers. Cash offers will look more attractive to those selling their homes because there isn't a risk of financing falling through at the last minute. This can sometimes help with negotiations, and you might end up paying less for the home because of the convenience when you buy a house with cash.


The downside of purchasing a home in cash comes with tying up your funds in one asset. Without a cash reserve set aside, you won't have a safety net if an emergency would come up, or if you find yourself needing to sell your home sooner than expected.


Taking Out a Mortgage


There are many benefits to financing a home, starting with the fact that a home buyer may simply not have the cash to purchase the home they want. Working with a bank to finance the home can open up more options, along with freeing up cash for move in costs like fees, taxes, repairs, and renovations.


While debt does have a negative reputation, not all debt is created equal. With reasonable interest rates and tax deductions associated with buying a home, a mortgage tends to be one of the least expensive debts you can have. It also means your cash won't be tied up if you need quick access to funds in the case of an emergency.


Unlike paying for your home upfront with cash, a mortgage will come with monthly payments and interest. That means that you'll be paying more over time. However, investing the cash that you would have spent will often result in making more than you'll spend in interest.


There are clearly pros and cons on both sides of paying cash for a house vs. mortgages. At Fremont Bank, we're here to help you make these big decisions and set yourself up for a successful financial future.



Posted by: Christina Valdez, Marketing Specialist
4/17/2019 3:04:33 PM | with 0 comments
Filed under: a, buying, home, mortgage
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