A property is an investment and asset that saves you money on rent if you live in it and earns you money if you rent it out. When it comes to purchasing property in Dubai, you have two options: pay cash or apply for a mortgage. Which of the two options is preferable? Let’s find out with our comparison of cash vs. mortgage purchases.
Cash or Mortgage?
Numerous factors can influence your decision to buy a property with cash or a mortgage. Both mortgages and cash purchases have advantages and disadvantages. It all depends on your personal preferences, financial situation, and reason for purchasing real estate in Dubai…or anywhere else in the UAE.
Let’s compare cash versus mortgage purchases so you can make an informed decision based on your specific circumstances.
The benefits of buying a house with cash:
There is no getting around the fact that mortgages are expensive. In comparison to cash purchases, mortgage purchases incur numerous additional costs, the most significant of which is interest. At the end of a home loan term, you will almost certainly have paid far more than the original purchase price of the property.
There may also be bank fees, processing fees, and closing costs associated with the transaction. An all-cash transaction eliminates the need for these extra payments, making it much easier on your wallet in the long run.
2. The ability to negotiate
One of the most significant disadvantages of purchasing a home with a mortgage is the loss of negotiating power. Because they know their budget and can bargain for a better price, cash buyers have a better chance of negotiating a real estate deal.
When deciding whether to buy a house in cash or with a mortgage, you must first qualify for the latter. This necessitates a plethora of documentation to wade through. Even so, there is no guarantee that you will be approved for the mortgage amount you requested. A cash transaction will put an end to these annoyances before they begin.
3. The cash route is quicker
Cash purchases involve direct transactions with either the seller or the real estate agent. There are no lengthy processes or third-party involvement.
When you decide to get a mortgage, the process becomes much more difficult. Bank formalities, approvals, and other issues all contribute to the lengthening of the timeline for your home purchase transaction. Cash home purchases save you both time and money.
The benefits of buying a house with a mortgage:
1. More flexible
There are numerous types of mortgages available in Dubai and the rest of the UAE. Each of these home loans has a unique payment schedule and interest calculation. So, if you decide to buy a home with a mortgage rather than cash, you have some leeway in selecting the tenure and fixed instalments that work best for you.
In a cash vs. mortgage comparison, cash purchases do not give you that flexibility. You either have the money to buy something or you don’t. Even if you have the entire amount saved up, it’s a significant outlay that could leave the individual cash-strapped for other expenses and/or investments.
2. Convenient and easy to manage
Another factor to consider when weighing mortgage vs cash options is the difficulty of saving up a fixed amount for an all-cash purchase. It could take years of saving to accumulate the amount, which might not even be enough if the property value rises over time. This process may be easier to accommodate if you have the minimum salary for a home loan in Dubai.
This is one of the reasons why many expats obtain mortgages in Dubai to finance the purchase of a home. This enables them to purchase the property with an easy-to-manage home loan in Dubai. In some cases, if the owner decides to rent out the property, the rental income will exceed the monthly mortgage payments.
3. More liquidity
The main disadvantage of paying cash for a house is that it ties you up financially. With all of your money invested in a house, you may not have the financial flexibility to deal with other money-related issues.
It could be an emergency, an urgent travel plan, or a fantastic real estate deal that requires a down payment. Buying a house with a mortgage protects you from these potentially catastrophic scenarios. You obtain the property without jeopardising your financial stability.
Is it better to buy a property with cash or with a mortgage?
This question has a complicated and multi-layered answer. There is no single correct answer. A lot depends on your personal situation and preferences when weighing the pros and cons of buying a property with cash vs a mortgage.
A mortgage should be considered by the buyer as the better option. It would give them a longer payback period where they could own a home without running out of money.
The buyer must also consider new and emerging mortgage services such as PRYPTO that help provide a tailored home-loan solution.
Read more about PRYPTO here: PRYPTO Mortgage Services for home buyers in Dubai