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Urbanis Africa has structured investment vehicles that would enable individuals across the world to invest in Real Estate Projects and in a Mortgage investment vehicle targeted at Low income home buyers. Urbanis Africa is managing low income housing projects in Kenya, Mozambique, Ivory Coast and the Gambia. The company welcome equity and debt investors in any of these projects for more information feel free to inquire from us.

 


Buying a Home: Cash VS Mortgage

Everywhere you turn, you hear how bad it is to carry around debt. So naturally, it’s logical to think that buying a home with cash – or sinking as much cash as possible into your home to avoid the massive debt associated with a mortgage is the smartest choice for your financial heal

But there’s a lot to consider when contemplating purchasing a home with cash versus obtaining financing via a mortgage.

Cash Cuts Costs – And Wins Bidding Wars

Paying cash for a home eliminates the need to pay interest on the loan and many closing costs. When buying a house in cash, there are no mortgage fees, appraisal fees or other fees charged by lenders to assess buyers.

Paying all cash can also make your purchase offer more attractive to sellers. In a competitive market, a seller is likely to take a cash offer over other offers because they don’t have to worry about a buyer backing out due to financing being denied.

A cash home purchase also has the flexibility of closing faster (if desired) than one requiring financing, which could be attractive to a seller. Those benefits to the seller shouldn’t come without a price. A cash buyer may therefore be able to obtain the property for lower price and receive a ‘cash discount’ of sorts”.

Also, a cash buyer’s home is not leveraged, which allows a homeowner to sell the house more easily – even at a loss – regardless of market conditions.

Mortgages Can Also Make Sense

Obtaining financing also has significant benefits. Even if a buyer has the ability to pay cash for a home, it might make sense not to tie up a lot of cash to purchase real estate property. Doing so could tie your hands down the road.

Cash buyers need to be sure to leave themselves plenty of liquidity. If the home requires major repairs or renovations, it may be tough to obtain a mortgage down the road as you don’t know what your credit score will look like in the future, how much the home will then be worth or other factors that determine approval for a mortgage.

Selling a home bought with cash could also be a problem if the owners stretched a lot financially to buy it. If cash buyers decide it’s time to sell, they need to make sure they will have sufficient cash reserves to put down as a deposit on the new home.

 

The Bottom Line

The best advice when considering which option makes the most sense is to opt for the choice that gives you the bigger bang for your money. Also ask yourself which will provide the greater return on your investment.

Paying cash for the full purchase price of a house is similar to investing in a bond that pays the same interest rate you'd pay with a mortgage. For example, opting to not pay a 30-year mortgage with a 5.5% interest rate is essentially the same as realizing a 5.5% return on the investment price.

If you decide to purchase a house with a loan, make sure you can easily afford the principal, interest, property taxes, insurance and other fees each month. And no matter how you pay for a house, make sure to have an emergency savings account equal to6 to 12 months of expenses in case your personal economy declines and you need a financial buffer.

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