Did you find the house of your dreams and now want to know what the best way to finance a home is? There are multiple options available and it can be difficult to determine which is the best one: should you take out a mortgage or liquidate investments and use that money? It’s important to understand the pros and cons of each option before deciding.

The pros of a mortgage

One of the main benefits of using a mortgage to finance a home purchase is that it allows you to keep your investments intact. This means that you won’t have to liquidate any long-term savings in order to buy a property. Additionally, mortgages enable buyers to spread out the cost of the home purchase over a longer period of time, allowing them to make manageable payments instead of having to come up with a large sum of money all at once. 

The cons of a mortgage

The biggest downside of having a mortgage is that by taking on additional debt, you may find yourself in a difficult monthly cash-flow situation. Additionally, mortgages leverage up an investment in property and there is no guarantee that the value of the home will increase; if it decreases, then you could end up owing more than the house is worth.

The pros of buying with cash

Liquidating investments to finance a home purchase can be beneficial for buyers who have low-return investments since those people might get a higher return by investing in a home. If you buy property after liquidating investments, you could own the property free and clear, and there’s no need to worry about making regular mortgage payments.

The cons of liquidating investments

One of the main disadvantages of liquidating investments is that you give up potential profits that you could have earned if you had held on to your investments. Furthermore, liquidating investments may result in taxes being owed on any gains you have accrued. 

If you have any questions, call 02-624-2788. I work with people who have their investments in the United States, and we often discuss the best way to finance a property purchase as it relates to their portfolios and long-term financial goals.

Douglas Goldstein, CFP®, GFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.

Published July 18, 2023.

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