What Are the Benefits of Paying Cash for a House?

Most people must take out a mortgage to cover the costs of buying a home. However, if you have the money to pay for the house without taking out a loan, there are several advantages to paying cash.

Home Ownership

When you own your home outright, you do not have to worry about making a monthly mortgage payment or being foreclosed on and losing your house.

Interest Savings

If you take out a mortgage to pay for your home, you will have to pay interest on the amount you have borrowed. You will also save on the cost of originating the mortgage.

Approval Process

Paying cash for your home can be beneficial if you have a sub-par credit score because you may not be eligible for a mortgage. Or, if you do get approved, you will have to pay a higher interest rate.

Faster Closing

If you are paying cash for the home, you can close the deal faster because you do not have to wait for a lender to approve the loan. This can be especially helpful during credit crunches when lenders have higher qualifications for borrowers.

Better Negotiations

Especially with sellers who are looking to sell their home quickly or if you are in a down economy, if you pay with cash, you may be able to negotiate a lower price on the home. In a down economy, fewer people will be able get approved for loans so being able to pay with cash will give you leverage to negotiate a lower price.

References

• Mortgage Professor: Pros and Cons of Paying Cash for a House
• WSJ: Why Paying Cash Isn't Always Wise