Buying Property- Cash Vs Mortgage
Cash vs. Mortgage!! Is a Mortgage Better to obtain the property?
â–ªï¸ Advantages of Buying Property in Cash
â–ªï¸ Benefits of Getting Mortgage
â–ªï¸ Cash vs Mortgage
The truth- A property is an investment that saves you a great deal of rent if you live in it and earns you good returns if you choose to rent it out. It can be real estate-related.
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You can either buy a property using your own fund or apply for a mortgage. How to finance? Which of the two options is better?
What's the Difference when it comes to buying property in Dubai, UAE?
Let's find out with our analysis of buying a property - Getting a Mortgage vs. Paying Cash
Paying cash for a home means you won't have to pay interest on a loan and any closing costs. A mortgage can provide tax benefits for some and means a buyer will likely have more cash in the bank to tap when needed.
Buying a Home with Cash - Obvious Advantages
Two of the main advantages of buying a house with cash are apparent, but bear mentioning.
â–ªï¸ No mortgage payments
You can enjoy more spendable income each month since you will not have to make a mortgage payment. This can provide you with more financial freedom, particularly if you are on a limited income.
â–ªï¸ Save money on interest
Interest paid on mortgage loans adds up to a large sum of money, even today when interest rates are extremely low. That means you are paying nearly double the asking price of your house! Buying with cash saves you this additional cost.
â–ªï¸ Sellers are more comfortable
Sellers feel more comfortable with for-cash buyers because they do not have to worry about last-minute problems with loan funding, nor are there a lot of contingencies involved. For a seller who is anxious to close the deal, this is a very good thing.
â–ªï¸ Financial issue
With all your cash savings invested in a property, you may not have the financial ease to cater to other money-related issues.
Home with a mortgage
â–ªï¸ If are buying your home with a mortgage, you typically have to wait between 30 and 45 days for the paperwork to finalize before you can close on the purchase. If you are buying with cash, the transaction can take place in about one week.
One of the biggest disadvantages to buying a house with a mortgage
You lose the power to negotiate. Cash buyers have better chances of negotiating a real estate deal because they know their budget and can bargain for a preferable price.
The advantages of buying a house with a mortgage can also be counted as the disadvantages to buying a house with cash.
1. When you decide to buy a property on mortgage and not cash, you have some flexibility to opt for the fixed installments that work best for you. There are many different kinds of mortgage in Dubai and the rest of the UAE. Each of these home loans come with different payment plans and interest calculations.
2. When weighing the buying a property in mortgage vs cash options is that saving up a lump sum for an all-cash purchase is not easy. It may take years of saving to accumulate the amount, which may not even be sufficient should the property value increase over time.
3. This is one of the reasons why a lot of expats get mortgages in Dubai in order to finance their property purchase. This allows them to buy the property on a home loan in Dubai, with easy-to-manage installments.
4. In some cases, owner chooses to rent out the property, the received rental amounts will be in excess of the monthly mortgage repayments.
Cash vs Mortgage
â–ªï¸ Give you an edge if another buyer is interested in the property, or if you want to try to negotiate a better price. Everything becomes easier on the seller's end when you can offer to pay for their house in cash.
â–ªï¸ You can save money on closing costs: Those who purchase their homes with cash can avoid many of the expenses typically associated with closing on a mortgage. These include loan origination fees, costs associated with having the property appraised, and various closing costs typically required by lenders.
â–ªï¸ Those who only recently purchased their house through a traditional mortgage may have a difficult time getting a substantial loan if they need one.
â–ªï¸ If you have purchased your house with cash, you will be able to borrow up to about 80 percent of its value if you are faced with an emergency or need the money for home improvements or other projects.
â–ªï¸ May be time consuming, if Properties purchased with cash involve direct transactions either with the seller or the real estate agent. There are no long processes or third parties involved.
â–ªï¸ When you choose to get a mortgage, the process becomes a lot more tedious. There are bank formalities, approvals and other issues that extend the timeline of your home purchase transaction. Buying a home with cash saves you both time and money.
â–ªï¸ Fluctuations in the housing market will not affect you
Recent fluctuations in the housing market left many homeowners upside down on their mortgage payments, meaning they owe more for their house than it is worth.
So, are you buying a property or a home with cash or mortgage?
The answer to this question is again, complicated and multi-layered. Whatever the reason, if you have the cash to do it, you may be wondering if purchasing a house outright is a wise decision.
It mainly depends on your individual situation and preferences. You need to consider a lot of different factors before reaching a decision, including:
â–ªï¸ Reasons for purchasing property
â–ªï¸ Type of employment
â–ªï¸ Future plans
â–ªï¸ A young person with a stable job who wants to purchase a house in Dubai and settle down in it should consider a mortgage as the better option. It would allow them longer payback tenure where they can own a home without being hard-pressed for cash.
â–ªï¸ A middle-aged real estate investor would rather buy property in cash to maintain maximum bargaining power and a quick turnover on investments. A cash purchase also ensures better returns than renting or selling a mortgaged property in Dubai.
Finally, it is being a good idea to speak with a financial advisor or tax professional for advice before making such a large financial decision.
Frequently Asked Questions
1. Can we buy a house with cash in UAE legally?
Yes, it is perfectly legal to buy a house in Abu Dhabi, Dubai or anywhere in the UAE with cash.
2. What are the factors involved when buying a property? Is it better to buy or rent in Dubai?The rent is more economical. On the other hand, the total amount you pay for renting a two-bedroom apartment in Dubai in a period of few years can be easily used as the installment for buying your own house in Dubai. When deciding whether to buy or rent a home in the UAE, it pays to educate you on market condition, interest rates and an estimated cost of buying a property in Dubai.
3. Can foreigners buy land in UAE?
Yes, foreigners can buy property in Dubai â€“ it doesn't matter whether you're a resident or non-resident. However, there are certain rules to buy property in the UAE for foreigners that must be taken into account.
4.How much money do I need to buy a house in UAE?
Property prices in the UAE vary for different emirates and the type of property you're interested in. the price of buying a house or apartment can fluctuate greatly depending on the area of interest. Cash buyers need to know that even within the same emirate.
Based on the listings , the minimum amount you should save to buy an apartment or house in five of the emirates are shown below:
Cost in Abu Dhabi
Villa: AED 700,000
Apartment: AED 275,000
Villa: AED 375,000
Apartment: AED 180,000
Villa: AED 260,000
Apartment: AED 210,000
Villa: AED 215,000
Apartment: AED 100,000
Ras Al Khaimah
Villa: AED 600,000
Apartment: AED 180,000
We wrap up the session, on the analysis of buying a property in cash vs mortgage. Remember that the property buying process may differ from one emirate to another. For example, you need to follow certain legal steps to buy property in Dubai.
Thinking of making a real estate purchase in Dubai? Familiarise yourself with the pros and cons of buying property in Dubai.