After finding the right property to purchase, the buyer should decide what financing scheme he will use to acquire the property. Basically, there are three modes of paying that a buyer could choose from to purchase his chosen real estate. These are the Spot Cash, Deferred Cash Payment, and Long Term Financing.
Ideally, a resale property from an individual seller is paid in Spot Cash whereas a real estate for sale from a developer can be purchased in longer terms.
Let us take a closer look at the three financing terms.
Spot Cash – As the term itself suggest, this is an outright payment for the entire contract price of the property you are buying. Spot Cash payment has several advantages, one is the large amount of discount that can be availed, the other is it does not require plenty of documents on the part of the buyer. The disadvantage is that only a few buyers can afford to do so.
TIP: Do not pay Spot Cash from your savings. Loan from other sources that offer lower interest rates and then pay Spot Cash.
Deferred Cash – Buyers who do not want to be burdened with interest payments prefer to pay through Deferred cash payment. This is similar to installment without the discount and without interest.
Long Term Financing – Most buyers choose this payment scheme because it feels light and can be inserted as part of the monthly budget for the household. With Long term financing the contract price is divided into two: the down payment and the financed amount. A mortgage from a financial institution covers the amount to be financed. The disadvantage of this financing scheme is that the longer the term, the higher the total payments you will have to cover making the property more expensive as a result.
TIP: If you can afford to pay a large down payment, do so.
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