The Pros and Cons of Buying a House Outright With Cash

pros and cons buying a house outright with cash

Around 12% of homebuyers pay cash for their new homes. Just because a lot of people don’t pay cash, does that mean you shouldn’t either?

It is true that there are some pros and cons to paying cash for your home, but will the pros outweigh the cons. If you have the cash to pay for your home, should you do it?

We are going to go into both the pros and cons of paying cash for a house. There’s really no right or wrong answer. There is only the right answer for you and your situation when purchasing property properly.

Continue reading this article to learn more about buying a house outright with cash and if it is a good idea.

Pros of Buying a House All Cash

Now let’s go into more detail about why it might be a good idea to go with cash. Here are the most important pros of buying a house with all cash.

Makes You More Attractive to the Sellers

Money is money, right? Well, not necessarily. If you come to a seller and let them know you have cash money to buy the place, they are going to take you more seriously.

If you have to go through the process of getting a mortgage, they might not be sure that you’ll qualify for your loan. If you don’t already have a preapproval, that makes things even more difficult.

Applying for a mortgage makes the sales process take more time than if you’re going to hand over cash at the time of the sale.

There is a possibility that the borrower won’t qualify for a mortgage, which means they could take the house off the market and end up having the deal fall through. With a cash buyer, the sellers don’t have to worry about that, which is why they are often more attractive to sellers.

Cash Buyers Often Get a Better Deal

If you want to negotiate or move quickly on a house, then you’ll need cash. As a cash buyer, you’ll be able to get in front of buyers that have a need for a mortgage.

It’s easier for you to bargain than someone that needs to depend on a mortgage.

You can remind the seller that money in hand is worth more than potential money that is out there, even if it is less than what they might be able to get for the house if they wait around.

No Need to Get a Mortgage

When you have cash, you don’t have to go through the mortgage process. No matter how great your lender is, it is still a process.

It is more difficult to get a mortgage now than it has been for a long time. Since the housing crisis from 2007 to 2008, underwriters for mortgage companies are taking a closer look at all applications.

This might be a wise move for the lenders, but it can mean extra time and hassle for people looking to get a mortgage.

Mortgage Worries are Miles Away

Mortgages are usually the highest cost in your house. If you’re worried that you’re going to fall behind on your mortgage, this can cause you to stress out and lose sleep. On the other hand, if you don’t have a mortgage, you can breathe easy knowing that your home is your own.

Cons for House Buying With Cash

Now let’s go into more detail about why it might not be the best idea to go with cash. Here are some of the most important cons of using cash to buy a house.

A Lot of Money Is In One Spot

When you pay cash for your house, you’re sinking a lot of money in one thing. If you qualify for a really low interest rate, it might make more sense for you to get a mortgage and use your money to make you money.

Let’s say that your interest rate was even 5%. If you could put your money in investments and make any higher of a percentage, it might be a good move for you.

Financial Leverage Goes Out the Window

When you buy a house, your hope is that it is going to go up in value. If your home goes up in value, you stand to generate a higher profit because of leverage. Keep in mind that things could very easily go the other way if your home decreases in value.

It’s always best if you consider how you’re going to pay for your home, along with what you plan on doing with your home and how long you want to live there.

You Greatly Decrease Your Liquidity

If all of your cash is tied up in your house, it can hurt you financially if you aren’t properly prepared.

Let’s say you have all of your money tied up in your house, and then you need a big chunk of cash to pay for a purchase. If you don’t have it, things are going to go very badly for you. While it wouldn’t take very long to get money out of a bank account, the stock market, or other similar accounts, that’s not always the case when you’re trying to liquidate a home.

Buying a House Outright With Cash – Yes or No?

Now that you have the information about buying a house outright with cash, you can make your decision. The information on proper property purchases is laid out now, and it’s time to make the best decision for you.

It’s easy to see the pros of not having to worry about a mortgage, but it’s also easy to argue for the cons of not having as many liquid funds. An all cash real estate purchases comes down to what the most important things are for you and your family.

Do you need more help with housing, mortgages, or home improvement? Keep reading our blog to get the help you need. Visit the Real Estate section to learn more about house flipping, home ownership, renovations, real estate investing, and property management.