5 Reasons to Buy a Home With a Mortgage Versus Cash

If you have enough cash in the bank to purchase a home without a mortgage, you might want to pay for the house upfront. You might love the idea of owning your home free and clear, and you could be hoping to save money on interest. Before you do this, though, consider the many reasons to buy a home with a mortgage instead of cash. You may find that a mortgage is your best choice after all.

1. Increase Your Buying Power

Depending on the amount of cash that you have on hand and the area that you want to buy a home in, your options might be limited if you stick to buying a house in cash. If you don't mind buying a fixer-upper or if you live in an area with affordable housing, this might not be an issue.

If you live in an area with a more expensive real estate market or if you want a higher-value property, though, you might want to think about taking out a mortgage. This can help you enjoy increased buying power so that you can buy the home that you actually want and that will be a good fit for your family.

2. Use Your Money to Make Other Investments

Many people who have plenty of cash on hand choose to take out a mortgage so that they can use their money for other investments. If you qualify for a mortgage with a low interest rate, which might be an option if you have a good credit score and if you're willing to shop around for good rates, then your interest costs might not be as high as you think.

You can then use the money that you were going to use for your home purchase for various investments. If you put your money into an investment vehicle that pays a high rate of return, you may come out ahead, even when you account the money that you have to pay in interest on your house.

3. Keep More Money on Hand for Emergencies

You never know when a major emergency might hit your household. One of your family members could get sick and could end up with expensive medical bills, for example. If you spend all of your cash on a house, then you might not be prepared for this type of emergency. If you take out a mortgage instead, you can keep a bigger emergency savings account for when you need it.

4. Enjoy Potential Tax Benefits

Home ownership has some tax benefits. Some can be enjoyed by all homeowners, such as deductions or credits for making certain energy-efficient improvements to the home. Some are designed for those with a mortgage in mind, however.

There is a tax deduction that can be used for money paid in mortgage interest, for example. Of course, it is critical to talk to an accountant about these possible tax benefits to see if you may qualify. If you do, this could be a good perk of taking out a mortgage instead of buying a home in cash.

5. Use Your Cash to Upgrade the Home

After you purchase a home, you may want to make some repairs and improvements. If you spend the majority of your budget on purchasing the home itself, coming up with the money for the renovations might be challenging. You can leave yourself the opportunity to improve your new-to-you home, though, by taking out a mortgage.

The idea of buying your own home in cash might be exciting, but you shouldn't rush out and do something like this. Instead, consider the perks of using a home loan to make your purchase. Contact us at Cornerstone Residential Mortgage to find out more about your mortgage options.