Eli5<- what are the pros/cons of borrowing money from the bank vs paying cash when buying a house?

Question

And why would it ever be a good idea to borrow if you can pay cash and pay no interest to the bank?

In: 18

Answer 1

Also have to consider the alternative; renting. You need to have housing.

Any money you pay in rent is gone, any money you pay into a mortgage is eventually going to be your property. The only time renting is beneficial over buying and paying of a mortgage is if you aren’t expecting to stay for long and if you’re losing opportunity costs (ie, putting that down payment somewhere else with potentially better returns).

Even if you had the cash to buy a house immediately, I’d still consider getting a mortgage, if not just for the additional financial buffer, comfort of living and investing the remainder.