There are significant differences between the lump sum payment and the 30-year repayment of the loan in terms of payment methods, financial pressure and risk.
A lump sum payment is when a home buyer buys a home directly in full and does not need to borrow. The main advantage of this approach is the avoidance of loan interest expenses and the ability to take immediate ownership of the property. In addition, a lump sum payment eliminates the stress of future repayment due to interest rate changes, while enjoying full home occupancy and freedom after the purchase of the home.
However, there are also some disadvantages to paying in a lump sum. First of all, you need to have enough funds to realize a one-time purchase. For most people, paying it all in one lump sum can be a huge financial burden, as buying a home is often one of the biggest expenses in people's lives. Secondly, a lump sum payment will take up more cash flow, which will have a certain impact on the daily life of individuals or families and other investment plans. Additionally, if a homebuyer spends most of their money on a lump sum payment, they may miss out on other investment opportunities as cash is locked up in the property.
In contrast, choosing to repay the loan for 30 years means that the buyer will pay for the purchase of the house by taking out a loan in instalments. The main advantage of this approach is that it spreads the pressure of paying the cost of buying a home, making it more flexible and affordable. Homebuyers can leverage their funds with loans to keep more cash for other investments or to deal with unexpected situations. In addition, with inflation and incomes growing, loan repayments are relatively easy as purchasing power increases in the coming decades.
However, there are also some risks and inconveniences associated with repaying the loan for 30 years. First of all, the total cost of buying a home can be much higher than paying it off in a lump sum due to the interest on the loan. Second, long-term mortgage payments limit the financial freedom of homebuyers, requiring them to make a fixed monthly payment amount over a considerable period of time. Paying off a mortgage can become more difficult if a homebuyer experiences financial hardship or loses their job, for example. In addition, fluctuations in loan interest rates and changes in housing prices can also have an impact on the way the loan is repaid over a 30-year period, which may lead to changes in repayment costs.
To sum up, a lump sum payment and a 30-year loan repayment are two different ways to buy a house, each with its own advantages and disadvantages. Buyers need to choose the right option for them based on their financial situation, risk tolerance, and long-term planning. Whichever option you choose, you need to consider carefully and make sure that you are fully aware of and well-informed about the relevant financial knowledge and laws and regulations during the home buying process to make an informed decision.