WHY GET A MORTGAGE IF YOU CAN PAY CASH?

That�s a good question. Why not pay cash instead of financing a home purchase over say 15, 20 or even 30 years? For many, that might not be much of an option. Many of us just don�t have a couple of hundred thousand dollars sitting in a bank account. Or, there are funds sitting in a bank or investment account to be used for retirement or other financial goal. Such funds can also be inherited. Cash purchases really aren�t that uncommon at all and depending upon the current market, anywhere from 30-40-50% of real estate transactions do not involve a mortgage. Yet whatever the source of funds or purpose, is it a good idea to pay cash instead of financing a home?

Lenders make money by charging interest on the loan. You can borrow $40,000 for an automobile but the lender will want you to pay interest on the amount borrowed for the privilege of loaning you the money. Credit keeps cash flowing through our economy. And while you may have cash in the bank and are thinking of using it, here are a couple of things you should consider.

Real estate is not liquid. Once you pay cash for a house the only way to get that cash back is by selling the property or accessing the equity with an equity loan. Selling involves a fair amount of closing costs, not the least of which is real estate agent commissions.

And due to this lack of liquidity, whatever account you had those funds in is depleted. Granted, savings accounts and certificates of deposit aren�t paying all that much in interest to you but if you keep that cash in an interest bearing account and finance the purchase, you�ll still have liquid funds available to you when needed. It�s also the same reason a bank uses a credit line to fund mortgage loans for its customers instead of reaching into the vault for a stack of money.

Second, as interest rates are still very near historic lows, leveraging borrowed funds at such low rates makes it relatively attractive to borrow now with these low rates and fix those payments with a fixed rate or hybrid loan.

When making any such consideration about what to do with a cash account, especially so when considering making such a large purchase such as a home, it�s important you speak with a financial planner or advisor who can point out the pros and cons of making a cash deal.

For more information or questions about mortgage loans,
Please visit Majestic Home Loan

Or Call  (855) 757-8748