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If You Have Cash To Buy A Home In Full, Should You Still Consider A Mortgage?

If you have all the cash you need to buy a home, paying for it in full seems like a no-brainer, right? Not so fast! There’s a lot to consider when buying property, especially if you’re doing so as an investment. Here’s how you can break down your options and make the best decision for your opportunity!

The Advantages Of Paying With Cash In Full

 

One would think that buying a home with cash in full is much better than bringing on the debt associated with a mortgage, and thus the smarter financial choice. There are indeed many advantages to paying cash in full because it means you won’t have to pay interest on a mortgage loan.

 

It can also be the deciding factor in getting you the property, as paying with cash is usually more attractive to sellers. When the market is competitive, a seller is more likely to take a cash offer over others, as they won’t have to worry about a buyer backing out if the lending organization denies financing. Purchasing a property with cash can also make closing faster, which can be very attractive to the seller.

 

Cash can help you overcome certain limitations associated with financing a flip. For example, if a property needs renovations, it can be tougher to get a loan or mortgage because you won’t know what your credit score will look like in the future, how much the home will then be worth, or other factors that determine approval for financing. 

 

While paying in cash certainly simplifies the transaction, there are several benefits to getting a mortgage. This is especially true if you’re selling and buying another property!

 

When Would A Mortgage Be Beneficial?mjs-mortgage-body-image

 

Even if you can pay cash in full, you may not want to tie up all your cash to buy real estate. In some situations, it might limit your options, especially if you want to flip the property. If you bought a property with cash and you decide to sell it, you need to make sure you have enough to put down as a deposit on a new home. You need to be sure to have plenty of liquidity, and by going with a mortgage, you can give yourself more financial flexibility. 

 

A mortgage can also give certain property investors tax benefits. While most Canadians can’t deduct mortgage interest on their taxes, using a property for rental income purposes can let you deduct the interest. If you rent out rooms or renovate a basement to turn it into a livable suite, the income you earn from a tenant or tenants makes your expenses count as rental-related. You can also deduct mortgage interest if you operate a business out of your home. 

 

When considering whether to do a full cash purchase or mortgage, go for the choice that gives you the biggest bang for your buck and the best return on your investment. If you need help assessing your situation, talk with Matthew J. Scott Property Investments!

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