Even if you have enough cash for a home, a mortgage might make sense. Here are factors to consider.

Cash is king, or is it? When it comes to buying a new home, one of the most important decisions is how to pay for the purchase. There are advantages to paying cash, but mortgages are popular for good reasons. Here are factors to consider when deciding to pay cash vs. a mortgage.

Cash means a stronger offer

Cash can make your offer stand out among others and help you get the house you want. Sellers like cash offers because they don’t have to worry about the deal falling through because of financing.

Also, by giving the sellers the assurance of cash, you might be able to negotiate a lower price.

Actual savings with cash

No mortgage means no interest and no closing costs, which may add up to paying less in the long run.

A mortgage would mean more cash on hand

Life has a way of throwing unexpected expenses at everyone at some point. If you use cash to purchase a home, you could find yourself in a financial bind later on. By borrowing and budgeting appropriately, you can keep cash on hand for emergencies like repairs, insurance deductibles or lost income due to illness or injury. HELOCs also come in handy in these situations.

A mortgage allows you to diversify

Taking out a home loan allows you to come up with a plan for your cash that works for you. Some homebuyers find that a mortgage allows them to pursue other financial goals – like saving for retirement or other investing.

Possible tax savings with a mortgage

Current tax laws allow homeowners to deduct interest expenses on up to $750,000 of debt. However, taking this deduction on your income taxes means you have to itemize deductions and you can’t take the standard deduction. For 2020, the standard deduction is $12,400 for singles and $24,800 for married joint filers. Talk to a tax advisor to find out how the law applies to your situation.

Where are you in life?

Depending on your personal financial picture, there are some points in life where you may want to eliminate the obligation of a monthly payment. For instance, a fixed income or the prospect of reduced income might make paying cash a better option.

When considering a mortgage, think about your budget and financial goals for the entire life of the loan, which could be up to 30 years.

What will make you sleep better at night?

Consider which option will give you the most peace of mind. Only you know your budgeting and spending habits, so its important to do what’s best for your individual needs and goals.

Consumers helps more than 1,000 members finance land, first and second homes, and home improvement projects each year. When you need a mortgage or home equity line of credit, call us at 800.991.2221. We’re here to help you get the home of your dreams!