If you're lucky enough to have money in the bank that will cover the cost of
a new home, you're probably wondering if it's smarter to get a mortgage or
simply pay with cash. There are pros and cons to both sides of the
argument, but actually, the answer to that question depends on the type of
person YOU are. So do you.
Like to be debt-free? Some folks just have an aversion to any debt of any
kind. If they carry credit cards at all, they make sure they pay off their
balances each month. They pay cash for cars, boats, vacations and any other
type of major expense, preferring to save up their money rather than
"borrow" it. If you're this type of person, it's probably better for your
peace of mind to simply buy your home with cash. Since a mortgage is a very
long-term proposition--usually 30 years--carrying debt for that length of
time might make you very uncomfortable.
Love to invest? Maybe you tinker a bit with stocks and bonds on your own
time, or perhaps you've hired someone to manage your investments. Either
way, if you prefer to invest your money, it's probably a better idea to get
a mortgage. That's because interest rates are so low on mortgages--and
investments are doing so well--that you'll actually make more in stocks than
you'll pay on your mortgage loan. In that case, it's better to be investing
that cash rather than using it to buy a house, as long as you're willing to
take the risk that your investments will pay off.
Need a tax break? In most states, the interest you pay on a mortgage is
tax-deductible, which can help lower your overall tax bill. If you get hit
with a lot of taxes at the end of the year, you may want to get a mortgage.
That way, your mortgage interest can help offer a little tax relief on April
15.
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Buying a new home - borrow or pay in full?
If you're lucky enough to have money in the bank that will cover the cost of a new home, you're probably wondering if it's smarter to get a mortgage or simply pay with cash. There are pros and cons to both sides of the argument, but actually, the answer to that question depends on the type of person YOU are. So do you.
Like to be debt-free? Some folks just have an aversion to any debt of any kind. If they carry credit cards at all, they make sure they pay off their balances each month. They pay cash for cars, boats, vacations and any other type of major expense, preferring to save up their money rather than "borrow" it. If you're this type of person, it's probably better for your peace of mind to simply buy your home with cash. Since a mortgage is a very long-term proposition--usually 30 years--carrying debt for that length of time might make you very uncomfortable.
Love to invest? Maybe you tinker a bit with stocks and bonds on your own time, or perhaps you've hired someone to manage your investments. Either way, if you prefer to invest your money, it's probably a better idea to get a mortgage. That's because interest rates are so low on mortgages--and investments are doing so well--that you'll actually make more in stocks than you'll pay on your mortgage loan. In that case, it's better to be investing that cash rather than using it to buy a house, as long as you're willing to take the risk that your investments will pay off.
Need a tax break? In most states, the interest you pay on a mortgage is tax-deductible, which can help lower your overall tax bill. If you get hit with a lot of taxes at the end of the year, you may want to get a mortgage. That way, your mortgage interest can help offer a little tax relief on April 15.