Pay Now or Pay Later? A Guide to Choosing Between Installment and Cash Payment
Have you ever found yourself in a dilemma when it comes to purchasing a high-ticket item or property? The decision between paying in cash or opting for installment payments can be a tough one to make. On one hand, paying in cash may give you a sense of financial security and satisfaction, but on the other hand, installment payments can provide a more manageable way of making payments over time.
In this guide, we'll break down the pros and cons of both payment methods to help you make an informed decision that aligns with your financial goals and needs. Whether you're looking to purchase a property or a high-ticket item, we've got you covered. So, let's dive in and explore the world of payment methods together!
Varying Risks
One of the most important factors to consider when buying a house is the issue of risk. Purchasing a house through installment payments may seem like an attractive option because it requires less time to save up for the down payment and ownership transfer expenses. However, there are certain risks associated with this approach, such as the need to apply for a loan. In case our financial status or qualifications are not deemed sufficient, our loan application may be denied. Moreover, if we are unable to pay the installment amount, there is a chance that our house may be seized.
If we choose to buy a house or condo before it is completed, we may be required to pay a reservation fee, contract fee, and installment payments until the project is finished. This is commonly known as "pre-sales." However, there is a risk of not receiving our down payment back if the project is halted or fails. This may result in the need to file a lawsuit, which can be time-consuming and expensive.
On the other hand, buying a house with cash may seem like a safer option. However, saving up a considerable sum of money can take a long time, and various expenses or unforeseen circumstances may arise, making it challenging to accumulate the required amount. This increases the risk of not being able to purchase the house when we want to. Therefore, it is essential to plan and divide the proportion of money saved for buying the house, taking into account any potential expenses or unforeseen events that may occur.
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Debts
Another factor to consider is debt. Opting for installment payments means committing to paying off your mortgage every month in the long run, which requires careful management of daily expenses. Being in debt also limits your ability to take risks and borrow money for investments or other purposes. On the other hand, buying with cash means no debt burden, providing a sense of freedom and an improved quality of life.
Stress & Mental Health
The possibility of debt can be a source of stress when purchasing a house. Opting for a mortgage or installment plan means being tied to payments for several years, and unexpected expenses can add to the stress. While buying with cash may require a longer savings period, it also eliminates the stress of monthly payments. To avoid stress and maintain good health, it's important to plan ahead and choose the right payment method.
Different steps in the purchase
Buying a home through installment involves managing loan application documents and registering the mortgage on the day of transfer of ownership. This process is more complex than buying a home with cash, which does not require a bank loan. When buying with cash, there is no need to deal with financial institutions, which makes the process less complicated and faster. All that is required is to prepare copies of the necessary documents, such as the house registration and ID card, for the purchase and sale agreement and transfer of ownership.
Different Investment Opportunities
If you have a significant amount of cash, investing in real estate and renting it out can be a profitable venture, but it may take some time to recoup your investment and see profits. The good news is that rental income can be used to alleviate financial burdens. Moreover, if your rental property yields a good return, you can earn profits while continuing to make installment payments.
Other Fees and Expenses
Buying a home through installment comes with additional costs such as interest payments that can be as high as the cost of the house itself. In addition, there are various fees associated with loan applications and mortgage registrations, which can add up to tens of thousands of Baht. On the other hand, purchasing a home with cash can eliminate these expenses, resulting in lower overall costs compared to buying a home through installment.
Tax Reduction
At present, the government does not offer any tax deduction policies for individuals who purchase a house or condo, regardless of whether they pay in cash or through installment payments. However, there is a potential tax advantage for those who choose to buy a house through installment payments. By deducting the actual interest payments made towards the mortgage, taxpayers can reduce their taxable income by up to 100,000 Baht per year. Although this might not seem like much, it's still a helpful way to lessen the tax burden and make the most of your investment.
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Conclusion
In conclusion, whether you decide to pay in cash or choose the installment payment option, it's important to remember that you are making a significant investment in your future. Don't let the decision overwhelm you or deter you from pursuing your dream property. Instead, take the time to carefully consider your financial situation and the availability of the property, and make a decision that feels right for you. We encourage you to stay positive and hopeful in your search for your ideal property. With patience and perseverance, you're sure to find a property that meets your needs and makes you happy. Best of luck!
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