Given the current financial crisis, is it preferable to buy a house by taking out a mortgage or paying in cash? Here are the various aspects to evaluate in order to make an informed decision (both in the case of a first or second home).
When you choose to buy a house, you must always place yourself in the perspective of those who make an investment, thus evaluating all the related aspects such as the benefits linked to the first home , taxes and fees relating to the purchase, deductions, etc
At a time like the one we’ve been experiencing for some years now, with interest rates at historic lows , and on the other hand a financial market that doesn’t allow for great returns, it becomes more convenient to buy a house by taking out a mortgage (for other very complicated to obtain), or deprive yourself of a good chunk of liquidity so as not to have any forms of debt?
The answer must consider numerous aspects, some of which do not directly concern the purchase of the property , but other aspects of one’s existence.
The deduction of interest expense: how much should you buy with a mortgage?
The tax deduction has a relatively modest impact when having to make the choice on how to purchase and this regardless of the fact that the accrual of compound interest on a mortgage ends up, logically, by significantly increasing the total outlay compared to the initial price paid on the house to the seller. Furthermore, the rate of the tax deduction can be changed at any time, as well as the maximum deductible sum, so it does not offer any certain starting point, for which to make a weighted choice.
What factors to consider when choosing between cash and a mortgage?
A first aspect is that of the duration of the loan : the greater it is, the stronger the incidence of interest expense will be, and the less should be its choice, especially if there are valid alternatives, such as the possibility of a cash purchase