When it comes to acquiring their dream home, many people are in doubt between buying property in cash or financing. After all, this is one of the most valuable investments, so it must be thought about and planned calmly and in accordance with your financial reality.
In addition, buying a property in cash or financed has pros and cons for both options. Therefore, we prepared this article to help you in that decision. Check out!
Is it more worth buying property in cash or financing?
The definitive answer to this question is: it depends! This is because to buy a property in cash or financed, you must first assess your long-term financial situation, in addition to the conditions involved in each payment.
If you have already saved the total value of the property, make a simulation of how much this amount would yield applied by the time it would take you to pay for your house. Perhaps it is more worthwhile to invest and enjoy the income in the future.
But if you’re thinking about saving this money, you need to calculate how much you can save per month, taking into account your other expenses. For example, if you are going to live on rent during this waiting period, add that amount to your calculations.
When you reach the result of how long it will take to buy a property in cash, make a simulation of the value of the possible installments in the case of a loan.
Also, it is worth remembering that the final value of a property in cash is different from the final value of a financed property. That’s because the mortgage installments are made up of interest and fees that make the price higher in the long run.
In addition to the financial assessment, it is also necessary to analyze other points. For example, it can take a long time to save money to buy property on demand. Do you have the flexibility to wait? And how willing are you to give up some things in order to save and reach that goal?
On the other hand, if you are going to finance the property, how do you feel about the long term to finish paying the installments? All of this must be taken into account.
Advantages of buying property in cash
The biggest advantage of buying a property in cash is not having additional expenses with interest, fees and bank correction. In addition, this is an option to negotiate a discount on the value of the property which, according to experts, the ideal is to get at least 5% of the final value to be worth it.
When buying a property in cash, the transaction takes place only between the buyer and seller, without the mediation of a bank. Thus, the negotiation is made by the Promise of Purchase and Sale contract, which stipulates the down payment, which is equivalent to a percentage of the total price, to reserve the property.
After that, the buyer must go to a Notary Public to sign the property deed. And then, you have to pay the ITBI and go, this time, to a Real Estate Registry Office, to register the property.
Now, in case you still need to save money to buy property in cash, you need to take into account the time this process can take, which is usually many years. Thus, while this amount is formed, it will be necessary to live on rent, or remain in the parents’ house, for example.
Another point that should be taken into account is that, due to fluctuations in the real estate market, the standard of the desired property may appreciate and you will need to save even more money to be able to buy it in cash.
Disadvantages of buying a financed property
For many people, the best solution is to finance a property. After all, dealing with day-to-day expenses, and still managing to save a considerable amount, is not that simple and is far from the reality of many Brazilians.
Therefore, the bank releases the value to the seller, and it is already possible to carry out the change when the keys are delivered. Remembering that in the case of properties on the plan, it is necessary to consider the time for it to be ready, in addition to the expenses that will be added to the financing installments, such as rent, for example, during this waiting period.
When choosing this purchase option, it is also possible to use the FGTS in the financing. Many people get a satisfactory value by adding the savings with the Guarantee Fund, which helps to improve the amount paid at the entrance and reduce the rest, getting installments with better prices.
A loan can take up to 35 years to repay and, in general, banks accept that the buyer commits up to 30% of their income. In addition, the monthly installments are made up of the loan amount adjusted by the Referential Rate or IPCA, plus interest, administrative fees and mandatory insurance.
Thus, the big disadvantage of financing a property is that its final value is much higher, due to all these additions.
The middle ground might be the best option!
An interesting solution for those who have doubts about buying property in cash or financing, is to choose “a little of both”. That way, you don’t pay in full at once, nor do you get stuck with too long a loan.
For this, it is worth investing a good amount in the entry of the property, which is generally accepted, a minimum of 20% of the total value. Thus, the remainder that will be financed is not so high and, as a result, the payment term and interest rates are also lower.
In addition, what is left of the money saved can be invested, and with the proceeds you can reduce the financing installments backwards, managing to significantly reduce fees and interest.
Now that you have solved your doubts about buying property in cash or financing, check out other content on our blog that can help you buy your own home!