Due to a lack of sufficient liquidity, most borrowers take out a loan to buy real estate. In some cases, it may be more attractive to borrow even when the buyer can pay cash.
Some borrowers plan to pay for their property in cash by mobilizing all of their savings. Is this the correct solution? Explanations and advice to make the right choice.
By taking out a home loan, the borrower asks the bank to obtain a large sum of money to finance the purchase of a house or apartment. It is sometimes more advantageous to borrow even when you can afford to pay cash. Indeed, when rates are low, taking out a mortgage is more interesting than disinvesting your savings. The gain may even be higher in the case of a rental investment because the rents received are added to the profit provided by the loan taken out and the interest on the loan is deductible from the rental income. In addition, a well-negotiated mortgage and well-placed savings reinforce the interest of such an operation. It should also be noted that by keeping his savings, the borrower can more easily cope with an unforeseen expense.
Finally, loan insurance plays in favor of the loan even if the buyer has sufficient cash to pay for his property in cash. Indeed, in the event of disability, incapacity or even loss of employment, the insurance company will cover all or part of the capital remaining due. This support has no impact on the ownership of the property. As with the loan, it is advisable to negotiate the rate of borrower insurance in order to save money and obtain more effective guarantees. To do this, do not hesitate to use a free online comparator without obligation.
Paying cash consists of paying all the expenses related to the purchase of a good or service in one go. Paying cash has certain advantages. First of all, this situation is more comfortable for the buyer who will not have to pay the monthly installments of a loan each month. This option is also interesting if your investments earn you less than the cost of credit.
Thus, it is often more advantageous to take out a mortgage rather than paying cash. If you are lucky enough to have enough savings to pay for your house or apartment in one go, you can therefore pay part of it in cash, corresponding at least to the notary's fees, and keep the rest of your savings to in the face of possible setbacks. Mortgage rates are historically low, it would be a shame not to take advantage of them.
Being able to pay cash for real estate can lead to making the wrong decisions. It is useless to buy a property by mobilizing all of your savings. It is better to use only a part corresponding to the amount of the ideal contribution (20 to 30% of the borrowed capital).
