Paying in cash whenever you can instead of using a credit card is a good way to avoid debt. But did you know it was possible to pay cash for a house?
Although the process is a bit more complicated than withdrawing a big sum from your account and handing a wad of money to the seller, there are some clear benefits to doing this.
Why should I pay cash for a house, you might be asking? Here are six benefits to waiting until you have enough money to pay cash.
1. Your offer could be more attractive to sellers
If you offer to pay cash for a house, you can expect your offer to be more attractive to the seller.
This is even more true if the seller wants to close the home quickly. The process will go faster since you don’t have to work with a lender.
Plus, in a competitive market where many people make an offer on the same house, yours is more likely to appeal to the seller if all the other offers are conditional on financing.
2. You won’t need to get the house appraised
Many sellers prefer cash house buyers because they allow them to alleviate some contingencies.
When someone buys a house with a mortgage, they need to get this house appraised. This is required so the lender can be assured that they are not loaning more money than a house is worth.
When you pay cash for a house, there is no need to get the house appraised. And if there is no appraisal, the seller will know that you will not try to negotiate a lower price based on the house’s appraised value.
3. You might be able to get a discount
Since selling a house to someone ready to pay cash is faster and easier, the seller might accept your offer even if it’s a bit lower than their asking price.
In a way, you might be able to get a discount just because you want to pay cash. But remember that this is more likely to happen if you’re trying to buy a house in a buyer’s market, where there are more houses for sale than buyers.
4. You won’t need to try to get a mortgage
Applying for a mortgage and getting approved can take some time. And there is still the possibility that you might get preapproved, but your loan might get declined for one reason or another.
When you pay cash for a house, you don’t have to worry about that sort of thing happening. This is another reason sellers find it more appealing to receive offers in cash than to get offers conditional on financing.
5. You will save a lot of money on mortgage interests
When you pay cash, you don’t have to make monthly mortgage payments year after year. This means you can save a lot of money by not paying interest on a mortgage.
Not getting a mortgage also means you don’t have to pay for private insurance.
All the money you could save by not getting a mortgage could allow you to save up for your retirement, to go on a dream vacation, or to invest and build wealth for your family.
6. You will own your home right away
When you pay a house with a mortgage, you don’t exactly own your home. Your mortgage lender owns it, and if you fail to make your mortgage payments, your home could be taken away from you.
But when you pay cash for your house, this can’t happen. You become the rightful owner of your home right away, and no one can take it away from you.
Owning your home will instantly bring you peace of mind. No matter what happens, your family and you will always have a roof over your head.
7. You will think carefully about your long-term decision
We have discussed the pros, but there are also some cons to paying cash for a house. For example, if you tie up most of the money you own into buying your house, you might be in trouble if an emergency arises. Remember that after paying for your house, you will also need to have enough money for home insurance and other necessary expenses associated with owning a home.
There’s also the fact that when you decide to pay cash instead of getting a mortgage, it could take you many years to save enough money to make your dream come true. Before you pay cash for a house, make sure it’s your right decision. You might realize that investing your money elsewhere would make more sense for you now.