The Pros And Cons Of Paying Cash For Your Home

Written by Posted On Thursday, 08 November 2018 22:31

Buying a home is one of the biggest investments you can make and when you are planning on buying a new home it is important to think about how you are going to pay for it. If you are fortunate enough to have the option to pay cash for your home you might be considering doing this. When you pay cash for your home you won't have a mortgage payment and you are going to enjoy owning your home free and clear. While paying cash for your home can be a good choice, it isn't always going to be the best choice for your situation. Read on to learn more about the pros and cons of paying cash for your home.

The Pros Of Paying Cash For Your House

Paying Cash Saves You Money

The interest on your home loan is usually about twice what the house is worth. If you are buying a 200,000 dollar home, you will have paid over 600,000 for it by the time you have paid your house off. You will save a lot of money in interest if you buy your house outright. The interest is going to be even higher depending on what your interest rate is. If you can only qualify for a loan that has a high interest rate you are going to be better off paying in cash. If you can get a very low interest rate you might want to consider getting a mortgage.

You are also going to have a lot of available equity that you can use if you ever need to get cash out of your property. You won't have to worry about housing values so much either since it isn't really going to matter much about what the real estate market is doing since you own your house in full and you have the luxury of riding out any market changes.

Only take out equity if you have an emergency because once you take out an equity line, you won't own your home free and clear anymore. You will also need to pay the credit line off and the interest rate might be higher than what you could get with a mortgage. Taking out a home equity loan is something you only want to do as a last resort because there is too great of a risk that things can go wrong.

You won't have the same peace of mind if you have an equity loan on your home. While taking out an equity loan isn't ideal, it does give you options and allows you to access your cash in an emergency.


Paying Cash Makes It Easier To Sell And Buy

If you don't have to worry about trying to qualify for a mortgage it is going to be a lot easier to buy the house you want. You won't have to be worrying about the financing falling through and you can sometimes even negotiate a better price when you are paying cash for your home. When you pay cash the seller isn't going to worry about the sale falling through or other issues that can happen when you are trying to secure a loan.

Paying Cash Gives You Security

It feels amazing not having to make that mortgage payment every month. You have a real feeling of accomplishment and you know that your house is truly your own. You don't have to deal with a lender and you are going to have a lot of extra money at the end of the month that you can save or invest.

If you lose your job or have other financial issues you don't have to worry about losing your home to foreclosure and you can always sell it and make money. As long as you pay the property taxes, you are going to have a roof over your head. This sense of security can be a huge mental benefit.

The Cons Of Paying Cash For Your House

You Lose The Tax Advantages When You Pay Cash

When you have a mortgage you get to write off the interest which can help you at tax time. If you pay cash you won't be able to take this valuable write off. You will have to pay more money in taxes if you can't take this deduction. You will have to run the numbers and see what is going to work better for you. In some cases, you might be better off taking out a mortgage so you can get the tax deduction.

Paying Cash Results In Less Liquidity

If all of your money is invested in your house, you aren't going to have it to spend on other things. While you can take out equity or sell your house, it is going to take a long time to do this. You won't have as much cash on hand when you own your home outright and much of your wealth is going to be tied up in your home. You are also going to have to come up with all of that cash to buy the house in the first place which is going to take a lot of your money.

You Lose Leverage When You Buy A Home In Cash

Sometimes having a little debt can be helpful. If you are able to get a low interest rate on your mortgage, you might be better off having one since inflation can erase the effects of having the mortgage. This only works if you get a very low rate so only get a mortgage if you can find an interest rate that is very low.

If you have the means to buy a home in cash, it is something that you might want to consider since there are so many rewards to doing so. Whatever you decide it is a big financial commitment and you have to think very carefully about what you want to do. Consider the pros and cons thanks to and then make your decision based on the facts.

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