The Pros and Cons of Buying a Home with Cash

There’s no greater sense of pride than being able to pay for a home with cash. While this benefit can send many people to the bank to throw down thousands of dollars for a house, there are many things to consider — good and bad — when buying a home all cash.

The Pros of Buying a Home with All Cash

When buying a home in all cash, there are many benefits that can make the deal sweeter for both you and the homeowner.

-No Mortgage Payments

How freeing would it feel not to have to deal with paying a mortgage each month? That’s what you’ll get when you pay for a house with cash. You never have to worry about having to budget your house payment each month. This comes in handy if you ever find yourself in a financial blunder.

-Equity

Financial blunders do happen, and not only do you not have to think about a house payment, but you will also have equity to tap into for extra cash.

-Save Money on Interest

When you have a mortgage, you have to pay interest on it, which just adds more to the price of the house. When you pay in cash, you don’t have to consider the interest added to it.

-Faster Closing

What makes buying a house such a long process is the financing. When you don’t need to go through getting a mortgage, you can close on a home much faster. Some people can buy a house in a matter of a week!

-Better House Price

Since buying a home with cash is so easy, some people are able to negotiate the price of the house to get a great deal. Sellers love it when buyers pay with cash because they don’t have to worry about the bank coming back to say that they won’t allow the buyers to purchase the home.

The Cons of Buying a House with Cash

Even though there are many benefits to buying a house with cash, there are some major disadvantages to it for anyone interested in it.

-Liquidity Loss

When you tie up your money in a house, you don’t have cash in the bank to cover an emergency. What if you needed money one day but didn’t have it because you used it all up on your house purchase?

Yes, you can use equity, but that takes time to receive. Time isn’t always on your side when you’re in a financial emergency.

-Inflation Protection

If you’re able to get a good interest rate, you might benefit from a mortgage. You can always add to that loan instead of getting a new one to benefit from the low rate.

-No Tax Benefits

Mortgage interest can give you a lot of tax deductions. When you pay cash, you don’t get them. Some people argue that the tax deductions do not add up to being as much as you save from not paying interest on a mortgage; however, that’s not always the case. It’s important to speak to an accountant or tax specialist to find out how much is gained from the deductions versus the savings from interest.

Weigh the Risks and Benefits to Decide What to Do

Consider all of these factors when you’re trying to decide whether or not to use cash. You may find that it’s not the best choice, or that it is, but at least you’ll confidently know you’re making a good financial decision.