Real Estate Business

Buying a house in cash requires buying the house without the assistance of a mortgage or loan. The notion of a cash buyer is sometimes misunderstood: they must have cash on hand when paying a price.

There are so many contemplations when deciding between buying a house in cash vs getting a mortgage. In this article, we will break down the pros and cons of each of the two options and help you decide the best strategy for you.

Pros and Cons of Buying a House in Cash

Next, we will debate on the pros and cons of buying a house in cash. Just because you can buy a home in cash, doesn’t surely mean you should. Nevertheless, for some, it may be the correct buying strategy. First, let’s get into the pros of buying a house in cash.

Pros of Buying a House in Cash

Pro #1- No Interest

When you buy a house in cash, you don’t have to be concerned about interest accruing from taking out a mortgage. The cost of interest on a 30-year loan will likely end up valuing you tens of thousands of dollars. Mainly if you use the full 30 years to pay off the loan.

Pro #2- No Closing Costs

Because you are funding in cash, you can abstain from paying closing costs associated with mortgage loans. You will fund no mortgage origination fees, estimation fees, or other lender fees. However, it’s always a quality idea to get an appraisal on any property you are buying to ensure you’re not paying extra.

Pro #3- You Can Usually Close Faster

If you’ve ever attempted to get a mortgage, you know it can be quite a nuisance. Getting a mortgage needs you to provide documents like proof of income, credit reports, bank statements, etc. When you pay in cash, you skip the whole mortgage process and can usually accelerate the shutting process and close the deal faster.

Cons of Buying a House in Cash

Con #1- You Can Attach A Lot of Money in One Asset

Putting millions on a single real estate investment can be risky. If you tie up a sizable amount of money in one asset, your investment portfolio becomes less miscellaneous, therefore increasing your risk of losing money.

Con #2- You Decrease Your Liquidity

In contrast to other types of investments, similar to stocks or bonds, real estate is an illiquid asset. Definition, it’s not fast, easy, or free to sell. Running most of your money into a house decreases access to liquid assets.

Con #3- You Give Up Leverage

 No one likes to be in debt. Although, being leveraged in real estate literally presents an upside to debt. Suppose your mortgage is sealed in and if you are able to get a low-interest rate, you may be able to make money by having a mortgage due to the results of inflation. If you pay in cash, you will give up the leverage.

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