Buying a House With Cash: 3 Pros and 3 Cons

Peter Chambers

Feb 20, 2023


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If you’ve entered the market to buy a home, pat yourself on the back. Saving up to buy a house is no small feat, so you should be proud. Many people take out a mortgage to pay for their homes, but some new homeowners use cash to cover the cost. Is this method advantageous? Should you consider buying a house with cash? This list will weigh the pros and cons.

What Are the Pros of Buying a House With Cash?

If you have enough cash, buying a house with one swing can be a home run decision. This home-buying method is ideal for people who like to get things over with quickly. Here are three pros of buying a house with cash.

1. No Mortgage Payments

One of the primary advantages of using cash is that you own the home outright and don’t have to make monthly mortgage payments. The cost of rent and mortgages take up a significant portion of people’s monthly income, so getting it out of the way can save you money down the road. Americans carry a lot of mortgage debt, over $11 trillion as of the summer of 2022. Paying with cash also means you save money by not paying the interest that comes with a mortgage.

2. More Attractive to Sellers

The housing market can seem rough for buyers. Home prices have soared since the pandemic, with uncertainty about when prices will come back down. A seller’s market means buyers must put in competitive offers when buying a house. Pay with cash is one way to make yourself more attractive to a seller.

Buyers who plan to take out a mortgage can be trustworthy, but they’re not as reliable as suitors who want to pay in cash. A cash transaction will quickly move because there’s less paperwork involved. You don’t need approval from a lender or anything to make a purchase. Another perk of paying with cash is you may be able to go under the asking price if the seller has few offers or wants to move quickly.

3. Simpler Closing Process

Another significant advantage of buying a house with cash is the closing process becomes more straightforward. If you take out a mortgage, the lender will give you the bill for various closing costs. You’ll foot the bill for fees for the application, loan origination, title insurance policy from the lender and other expenses. Paying in cash dismisses all those payments and makes closing day much easier and less stressful. 

What Are the Cons of Buying a House With Cash?

Paying with cold, hard cash can be a fruitful venture. If you have the funds to get it out of the way, then go for it. However, it’s not a foolproof plan. There are some cons to buying a house with cash. You may find yourself in financial trouble with these three disadvantages.

1. No Tax Deductions

When buyers take out a mortgage, they make monthly payments for 30 years on average, but that number can go down to as low as 10 to 15 years. On each mortgage payment, homeowners pay interest on the house. However, they can deduct the interest on their tax filings each year, thus reducing their taxable income. Paying in cash means you won’t get this option.

2. Draining Your Liquidity

Another disadvantage of paying entirely in cash is you’ll likely drain the liquidity you have to pay for the house. With housing costs the way they are, paying in cash is not as easy as it once may have been. At the end of the day, buying a house is an investment. Using cash means you’re converting an asset from liquid to illiquid. Taking on debt and improving your credit score could help if you want to invest in other financial ventures.

3. Other Housing Costs Remain

Paying for the whole house at once can save you time. Still, there are other costs you need to consider before finalizing such a significant purchase. You won’t have a mortgage, but there will still be property taxes, homeowners association (HOA) fees, homeowners insurance and other expenses. Draining your liquidity could hinder your ability to cover these costs.    

Buying a House With Cash: Should You Do It?

Buying a home is a significant life achievement. The process can be challenging, whether moving across the street or across the country. There’s a lot of paperwork involved, and you hope your offer is the one the seller chooses. Some people cut out the red tape and buy the house in cash. Is this the right move? It depends on your financial goals and what will help you in the short and long term.

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