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Why You Should Pay For a House With Cash

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“Pay for a house with cash??!”, you may be asking yourself. “How in the world do you expect me to do that?” Well, to be honest, there are people purchasing real estate with cash every day, so it’s obviously possible. Not only that, but those that dish out cash instead of borrowed money get even richer by doing so! It’s time for you to save up that cash before moving into that next house.

Benefits of Paying With Cash

Cash can be tough to come by sometimes, but after reviewing the benefits, I hope that you’ll start filling up that piggy bank even faster than before!

1) You’ll Have Emotion on Your Side – Imagine having your home for sale and a man dressed in a suit walks up to your front door. As you exchange greetings, he explains to you that he has an interest in purchasing your house and has the cash on hand to do so at this very moment. He then lifts the briefcase that’s been at his side and pops the lid.

It’s more cash than you’ve ever seen in your life. You soon find out that the cash equates to only 75% of your asking price, but he’s willing to buy it now and there might not be another buyer coming along for months! Would you take the deal? If you’re the average person with their home for sale, you would absolutely take the deal.

Cash gets people excited, and you can certainly get a deal when you’re able to flash it for a home purchase.

2) Less Hassle For The Purchase – Have you ever bought a house with a bank loan before? It’s a huge hassle! First of all, there is a long waiting time to get approved, there is a ton of paperwork to fill out, and if you mess something up, you may even lose your deposit! If you’re buying a house with cash, your transaction could occur with just you and the owner.

3) No Interest Payments – Not only could you get a deal on the purchase price when you’re paying with cash (benefit #1), but you’ll also avoid paying all of that interest to the bank! Sure, rates are low right now, but it still adds up! If you purchase a $200,000 house at a 4% interest rate with a term of 30 years, you’ll overpay by $144,000 just because of interest! Avoid the interest by paying with cash – your pocket book will thank you.

4) No Worries of Foreclosure – It’s tough to know what will get thrown at you in life. Perhaps you’ll experience a job loss or you’ll acquire a life-threatening disease, which could cost you thousands of dollars. If you have an outstanding bank loan that you simple cannot pay, the bank has every right to take your home, even if you own 99% of it. If, however, you paid for your home with cash, it is yours to do whatever you want with it. Sell it, keep it, rent it out. It doesn’t matter because it’s 100% yours.

Save Up Your Cash!

Of course it’s not going to be easy to save up thousands of dollars for a home purchase, but it’s definitely possible. Plus, there are obvious benefits for your future if you achieve this goal. Good luck!

Do you think you’ll ever buy a home with cash?

Money Save Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

26 Comments

  1. Oh I would LOVE to pay my house off with cash. Trust me.

    • Let’s work toward it! My wife and I plan to pay off our house in a hurry. Then the next one (our first rental) will most likely be in cash. Can’t wait to write about it. πŸ™‚

      • We are doing similar to you. We are working to pay off our house fast too. It would have been a dream to buy the first one with cash.

        • We didn’t buy the first one with cash, but now I wish we would have. We’ll get this monster debt paid off soon though!

  2. I am buying my next house in cash. We purchased a modest home (on a loan) 3 years ago and will have it paid for at the end of 2014 or maybe first qtr of 2015. We are going to take all of the money we were throwing at the house and set it aside for the purchase of our next home (shooting for the $225-$275 range). Then we plan to rent out our original place and pocket 100% of the revenue from it(around $900 – $1100/month)

    We hope to continue saving and purchase additional rental properties for 100% cash and eventually quit my job after 10 or so investment properties are purchased and producing (my wife still plans on working until we can replace both of our salaries).

    It’s a tough ride because we see all of our friends buying McMansions and/or socking away a ton of cash but I am convinced that this is our best bet in the long run.

    • Sounds like an awesome plan Matt! I have a similar one in place too, but it could vary between student housing and commercial real estate. We’ll have to keep each other motivated so we don’t get distracted by those McMansions! πŸ™‚

      • I like the idea of commercial as well, maybe when I’m off the ground I can look deeper into it. I think having a 100% paid for rental will be a good way to test the waters of property management to see if it fits us. Another reason I want to do it debt free is that you can get the same amount of positive cash flow from fewer properties than other investors that float everything which means fewer headaches and more cash!

        Love the blog keep up the great work!

  3. I think paying for a house in cash is a great goal and is possible if you live in an area of the country where housing is affordable. I would like to pay cash for our home, but I would settle for paying 50% down. It will still be some time before we are at that point.

    • I agree somewhat. Owning a house outright in a high-cost area might be a little unrealistic, but I’d still say it’s possible. If I didn’t pay cash, I’d work to pay down the remaining debts ASAP!

  4. I definitely think our next house will be paid for with cash. I’m guessing we will have our house paid off in 5 years (8 years altogether), and then I would like to apply that and some in savings for a house.

    What a relief that will be!

    • Awesome! Glad to hear it! Good luck paying off your remaining balance!

  5. I have been struggling with this for some time and after the real estate crash of 2008-2009, Im not convinced that paying off my home is the right thing for us. First, I value liquidity now more than ever. With a big bank just announcing the end to cash out refinancing, having a ton of ones net worth in their home could be sunk money in that you won’t be able to get at it if you really do need it. Instead, I want to horde cash and liquid investments. With a 4 1/2 fixed rate now, i truly believe ill be able to put that money to better use and earn greater return down the road

    • I agree that your net worth should not be wrapped up in your primary residence. However, if you are still investing your retirement in liquid vehicles, and investing in real estate as described above, you can have both liquid investments as well as illiquid cash flow machines. If you are willing to be a rental property manager, I think this is a great plan!

    • I understand your point of view and I guess it just depends on your interest rate and the rate at which you will pay it off. I have a 5.5% interest rate and my plan is to pay it off in about 2 years. I’m not confident that the money invested would gain 5.5% in the next couple of years so I’m going with the pay-off option. If I were looking at a longer time fence I might feel differently.

      *plus I like the security of owning property out-right, if you end up not liking having it paid for you can always mortgage it.

      • I like the way you think Matt. I would choose to pay off the house in almost every scenario.

    • It is important to have liquid accounts in place, but why can’t you have a large amount of liquid assets AND purchase a house with cash? I plan to have both in the near future.

  6. I two fiends who are professional comediens. They are successful and even wrote for TV shows. They bought their house for cash because of the uncertainty of entertainment. When I retire, my house will be mortgage free and I expect to move to a one story home in the future. I will pay cash for that house. At least that is the plan!

    • Cash definitely reduces uncertainty doesn’t it? I think your friends are quite wise!

  7. Paying cash for a house is a great idea and we absolutely plan to pay cash for our next home, and it will not be anything extravagent this time. No mortgage payments, no interest. Just a nice 2 bedroom bungalow, because the less space you have the less time you have to spend cleaning it. πŸ™‚

    • I love your outlook on your future house purchase. I have a relatively large house now (1,600 sq. ft. for 2 of us) now, and while it’s not extravegant, we could definitely live with less. And, to your point, the less space you have, the cheaper life will be! πŸ™‚

  8. Great post Derek! To answer you question, yes we do plan on paying for the next house with cash. How? Hopefully by downsizing, but this is still a few years away. I hope that we can stick to our plan! πŸ™‚

    • Sounds awesome Kanwal! I can’t wait to hear about that cash purchase! πŸ™‚

  9. You make some really good points in your post. However you don’t talk much about the benefits of paying with credit (ie-financing/mortgage). You build fantastic credit, and you can get a mortgage now for 3.00%. If you can make more than 3.00% on your money in the bank or an investment fund–then save your cash! And use someone elses money.

    • Percentages can often be misleading Joe. A house is a huge purchase. 3% of your house value is much more than 3% that’s in your bank account. That’s the main difference. If you have the cash for the house, don’t mess around, just pay for the whole thing.

  10. Thanks for sharing benefits of paying cash for a house.Nice and informative post.

    • You’re welcome! Come visit us again.


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