Lifestyles

What is Better, Financing or Paying Cash for your New Home?


April 16, 2021 • Fenny Peiffer

retirement home

Taking on a mortgage would be the natural consideration when the question of purchasing a home comes up. However, a lucky few don’t have to do this. Most retirees, who are downsizing, may find themselves with the options of financing or paying cash. Which one would you choose?

The accumulated interest, on the mortgage, would have significantly increased the total cost of your home. Because of this, owning a home free and clear may be extremely appealing. You will have more money to enjoy retirement without having to pay a mortgage. In addition, paying cash for your home also enables you to negotiate a better price. But, then again, interest in your mortgage may be tax-deductible.

Paying cash for your home can tie up your cash. It will mean you will have to go slow for a while because you will be without easily accessible cash. It is recommended you keep sufficient funds to cover expenses, such as medical and dental, for, at least six months. If not, you will lose a significant amount of money accessing your retirement funds before its time.

Whether financing or paying cash for your new home, you should always think about current mortgage rates, stock market conditions, terms on loans available, and other investments. If the mortgage interest is low, you can consider taking out a loan and adding more money to your retirement fund.

Whatever you go with, remember the purchasing or financing of a home is a large investment. Therefore, you must carefully consider your options and choices. Consider obtaining the advice of a professional financial consultant as he/she will enable you to understand your options better and help you come to a good decision.

If you decide on an outright cash purchase for your home, ensure that the previous owner has paid off the mortgage on the property. This detail is handled by the new mortgage holder when you get your loan. If you are in the position to, you may decide to pay cash is better. Or you may decide to finance a part of your home.

It is not easy deciding whether to pay cash or finance your new home. However, understanding your options will enable you to make a good decision depending on your financial situation and needs.

This article is courtesy of ActiveAdultLiving.com®, the website many retirees visit when they wish to know more about senior retirement communities.

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