Cash versus Financing in Real Estate Market in Kenya

Cash versus Financing in Real Estate Market in Kenya

Property Financing in Kenya

Most people ask themselves, which option to use between financing and paying cash when it comes to the acquisition of property.  The belief by majority of the people is that purchasing property using cash is the best way is underrated. The article below will help you if you are planning to purchase property either through financing method, or paying in cash. It is good to buy costly things like land, car, and a house with cash if you have an opportunity to hold cash on hand. This may seem like a surprise to some people, but this is what most wealthy people use mostly when the interest rates are satisfactory.

It is good to borrow money when the interest rates are low. Some people prefer to borrow money to buy an asset even if they have cash on hand to pay. They invest the cash and use the interests from the investments to pay the loan. If you bought a car and it is paid off you will still remain with the invested money and you will still be generating income from it.

The most important thing to consider when choosing whether to use financing, or pay with cash is opportunity cost, which is defined as the profit, benefit, or value of the property, or something else that must be given up to acquire, or obtain something else. Every resource should be associated with opportunity cost whether it is land, time, or money. Always remember that whether you decide to acquire property through financing, or paying cash you must incur extra costs to the value of the property. If you decide to finance the asset, the additional cost that you will incur is the interest rate on the loan and when you decide to pay with cash you will get an opportunity cost, or returns on the investment you will obtain by keeping that cash.

There are several benefits you will get when you are purchasing a home using cash. The major one is that you will avoid to pay interest rate on the loan and also any additional closing costs.  On the other hand, borrowing money from lenders has also benefits like you will not stretch a lot financially to purchase the property with your cash that you have saved.

Conclusion

It is advisable to consult financial experts before deciding whether to use financing, or pay cash for your property. They will help and advise you on the best way to use.

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