This presentation conveys two approaches to paying for a house. Financing with a mortgage and self-financing by paying cash. |
Next, let’s look at paying cash. We call this “self-financing” because to pay cash requires giving up investable assets which costs you interest. While most people can’t afford to pay cash initially for their house, many work hard to get their mortgage paid off fast. Having a paid off mortgage is the same position as having paid cash. If you did pay cash up front, you would first need to save up a lot of money. Then find a house and go into escrow. To take ownership, you will need to drain your savings account to pay the full price of the house. |
No math presented on this screen. |