Should you buy with Cash or with Mortgage: Which is the better option?

When you buy a house with cash, you pay the seller cash to cover the cost of the house. The cash you pay covers the full payment of the house. For this payment option, you don’t need to raise funds through a bank or worry yourself with the headache of repaying a housing loan.

Here is a scenario, if the selling price of a detached house in Lekki is pegged at N186 million, to buy this house with cash, you will have to pay the seller a minimum of N186 million for the property. The final figure will depend on whether this cost covers property documentation.

Pros of Buying a House With Cash

Let us highlight some of the advantages of paying cash vs mortgage financing when buying a house.

Seriousness: Property sellers will take you more seriously when they know you are not applying for a mortgage to pay for their house

Flexibility: It is flexible closing a home deal when cash is available than one that requires funding

Power of Negotiation: You have the advantage of negotiating a better deal to buy a property when you are paying cash for it. It makes it more attractive to the seller who would be more likely to negotiate

Tours: When you offer to pay cash for a house, you enjoy the liberty of taking a tour of the property

Lodging Complaints: As a potential buyer willing to pay cash to buy a property, you can lodge complaints on things you want to be repaired or upgraded before you make payment

Cuts Out Repayment Plans: Paying for your home phases out the option of trying to raise funds through the bank, which comes with a repayment plan and interest

Easy to Buy and Sell: Paying cash takes away a great source of uncertainty. When you decide to sell, you won’t find yourself at the mercy of a mortgage broker

A Sense of Security: If you lose your job or find yourself in a financial mess, you don’t have to panic if you buy your property with cash. If you own your house completely, you don’t have to worry about foreclosure (the act of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments)

Offers Home Equity: A house that you have fully paid for provides you with a reliable source of property equity if you ever run into financial troubles

Cons of Paying Cash to Buy a House

Buying a house by making cash payment also has its flaws as you will see in the lines that follow.

Trapped Cash: Let us be honest here. When you pay that much money to buy a house which will cost you a lot of liquid assets. You should only buy a house with cash if you still have a large pool of cash for emergencies. Once you buy a house with a full payment for it, the only way you can access that money again is to sell the house

Lack of Leverage: You will miss out on an opportunity to make money if you buy a house with cash as opposed to having your mortgage payment locked in. With a mortgage, you can have a favourable interest rate and during inflationary periods, you will find yourself making money due to the effects of inflation. 

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