So you're buying a section and then looking to do a house build, build a shed to live in or move a dwelling onto the property. You may be wondering whether it's better to use your cash or take out a home loan. While using the cash for the initial purchase may seem like the easiest and most straightforward option, there are a few reasons why getting a home loan may be the better choice.
Firstly, even if you have the cash available to purchase the land outright, there are more hoops to jump through with lenders when it comes time to get lending for building a dwelling or moving a relocatable home onto the property. This is because banks often view these types of projects as riskier than lending for the land itself. By taking out a home loan, you can access the funds you need for these projects from your cash without having to discuss the project with the lender.
Additionally, taking out a home loan can be a good option if you want to preserve your cash flow for other investments or emergencies. By taking out a home loan, you can spread the cost of the land purchase and any associated projects over a longer period of time, making it easier to manage your finances.
But what about the interest costs of the home loan? When you take out lending, you'll need to pay interest on the loan, which can add up over time. However, if you have savings available, we can set up the lending so that the cost of the interest is offset by the funds you have so that, until you use the funds for the build or relocation of a dwelling, you pay minimal or no interest on the lending.
Ultimately, whether you choose to use your cash or take out a home loan when purchasing land will depend on your individual circumstances. If you're unsure which option is right for you, it's always a good idea to speak with a mortgage advisor who can help you weigh up the pros and cons of each option and make an informed decision.
While using cash to purchase land or property may seem like the easiest option, taking out a home loan can be a smart choice, especially if you plan on doing renovations, building a dwelling or moving a relocatable home onto the property. By taking out a home loan, you can access the funds you need, preserve your cash flow and potentially make it simpler for everyone involved.