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September 6, 2008
Am buying a flat in the UK with the intention of renovating it and sell it on. Probably have enough money to buy with cash with enough spare for the renovation.
Please can someone tell me what the various advantages and disadvantages are of taking this route as opposed to getting a mortgage to buy the house with.
Many thanks
MAtt
In most cases, it will be better for you to get a mortgage. Even Bill Gates has a mortgage on his home. The reason being is that interest rates are still fairly low (at least in the U.S. - I'm unsure of the U.K.). You would be better off investing the cash you have because the return will be greater than the amount of interest you pay on a mortgage. If you get a mortgage at 6%, but you can invest your money and earn an 8% return, you just made 2% on your money, not to mention the money you will receive after you sell the home. You can make far more money by obtaining a mortgage and making wise investments with your cash.
read comments (8)
August 29th, 2006 at 2:13 am
Don't part with your cash.. Borrow on it…Consult a financial adviser - don't tell them your real name. - You only buy with Cash if your Dodgy and you don't want lenders or the Inland Revenue to peek at your Wad..
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August 29th, 2006 at 2:19 am
emm from my experience. went u buy cash. u can save money from paying interest. but if something happen could hard to return back that money your given.
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August 29th, 2006 at 2:59 am
The above 2 answers are both wrong.
Call a lender, many lenders, to find your best program for borrowing. You will not only have to give them your REAL NAME but a great deal more personal information, but everyone who borrows does it. Borrow with little down as you can. Team up with a realtor who works in the area so you can get an idea of what you can sell it for. The amount you buy it for and the amount you sell it for is called the spread. The spread is where you see how much you can invest and make a profit.
References :
Steve Morbitzer
Ned Merkle & Co. Realtors
stevemorbitzer@yahoo.com
614-329-1662
August 29th, 2006 at 3:53 am
no disadvantage, if you have cash use it you can always get an equity line of credit if you need $$$$ later
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August 29th, 2006 at 4:14 am
In the U.S. mortgage payment are tax deductable. Not sure about UK.
Another approach is to compare opportunity costs.
1. How much interests you need to pay to borrow.
2. If you borrow, you keep cash in your pocket, how much income can you bring in?
Compare amount of item 1 and 2.
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August 29th, 2006 at 5:19 am
if your wanting to be an investor cash is the best way to go if you have it the reason is number one you wont pay any interest think about that i mean that is pretty important ,an number two on a cash deal you can close faster therefore you can haggle the price lower
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August 29th, 2006 at 6:53 am
In most cases, it will be better for you to get a mortgage. Even Bill Gates has a mortgage on his home. The reason being is that interest rates are still fairly low (at least in the U.S. - I'm unsure of the U.K.). You would be better off investing the cash you have because the return will be greater than the amount of interest you pay on a mortgage. If you get a mortgage at 6%, but you can invest your money and earn an 8% return, you just made 2% on your money, not to mention the money you will receive after you sell the home. You can make far more money by obtaining a mortgage and making wise investments with your cash.
References :
August 29th, 2006 at 9:47 am
Big advantage: Low cash flow requirements. Since you could use the cash to make the payments, of questionable value
Big disadvantage: No leverage. Since leverage is what makes real estate such a fantastic investment (as long as you don't go overboard), this is like taking your queen and both rooks off the board at the start of a chess game.
There are times when buying for cash is a good idea. But not often.
References :
Loan Officer and Realtor in San Diego. Website http://www.danmelson.com