Are you amongst those who are searching to buy a house for yourself? If yes, then you must know how to shop around for the right kind of houses. It is certainly not possible for you to purchase your desired home with your savings only. Thus, there arises the need of taking out a mortgage loan. You’ll come across several lenders in the loan market who’ll want you to obtain the mortgage from them. Before you may do so, it’s important you find a reliable lender for yourself. Be sure to know “mortgage how much can I borrow” so that you do not obtain extra loan. This will enable you to repay the loan amount on time.

Mortgage or cash: Which option do you prefer?

Do you have the lump sum money to pay for your house? If yes, then you should at first, find out the return of investment when you pay cash for buying home. It is the rate of interest that you’ll have to pay throughout the mortgage term period. If you are able to make the entire payment for your new house with hard cash, then you can consider your property as an asset.

On the other hand, if you buy your abode with a mortgage, then you cannot declare your property as an asset or savings. The principal amount you pay for your house cannot be included since you could have paid that amount over a period of 15 or 30 years. The savings that you make is actually the interest that you’ll be paying for your mortgage. Thus, you’ll have to do the calculations to find out if it is better to pay cash for your shelter rather than obtaining a mortgage.

Taking out mortgage instead of paying cash: What are its advantages?

There are several advantages of taking out a mortgage instead of paying cash. Have a look at some of them.

Less investment needed – Most people will want to buy their home by making the entire cash payment, if they can. On the other hand, obtaining a mortgage loan for the purpose of home buying means you’ll not have to invest a lot of money in your abode. As such, you can invest your money in some other place rather than putting it entirely for purchasing home. Thus, the little investment you’ll have to do from your savings is the necessary down payment that you need to make for purchasing your house.

Loss of liquidity – If you are purchasing a house of $100,000 with cash rather than making the 20% down payment and taking out a mortgage, then this means you’ll have $80,000 of your hard-cash invested in your property. Now, if you face any kind of financial crisis all of a sudden, then you’ll require taking out a home equity loan for getting your $80,000. This means that you’ll have to pay the lender’s fees and also agree to the high interest rate than getting a mortgage.

No deduction on tax – When a home buyer decides to purchase his abode with hard-cash, he will not be able to get deduction on tax. However, if he wants to enjoy the benefits of tax deduction, then he’ll have to buy his shelter by taking out a mortgage.

So, if you are all set to purchase your home, you must consider if taking out a mortgage is a better option for you than paying cash for it.