Buying a home “with cash” can benefit both the buyer and seller with a faster closing process than with a home loan. Paying cash also means no interest and can mean lower closing costs. Paying cash for a home eliminates the need to pay interest on the loan and closing costs. Lenders don't charge mortgage origination fees, appraisal fees, or other fees to evaluate buyers, says Robert Semrad, JD, senior partner and founder of Chicago-based DebtStoppers Bankruptcy Law Firm.
Buying a home with cash doesn't eliminate recurring expenses. You'll continue to pay property taxes and, if you're wise, homeowners insurance. However, you can take the money you would have spent on monthly mortgage payments and save it for retirement or emergencies (or spend it). Paying all the cash for a home may make sense for some people and in some markets, but be sure to consider the potential downsides as well.
Therefore, it stands to reason that buying a home with cash or investing as much cash as possible in your home to avoid the enormous debt associated with a mortgage is the smartest option for your financial health. When a cash buyer makes an anxious purchase, they may not conduct a rigorous title search or get an appraisal. You have to sit and wait until you have all the money you need set aside in cash and not just for the purchase price. Although you still need to hire a title company even though you buy cash, lenders often pressure borrowers to use their title company, which can prove to be twice as expensive as the company's borrowers prefer to use.
There are several things that make buying a home with cash attractive, but the most basic thing is peace of mind. They can inform you about the local housing market and estimate the number of offers that are made with cash. When buyers apply for a mortgage, they tend to think in terms of monthly payments rather than the total cost of buying the home. Another great advantage of buying a home with cash is that buyers have more control over the transaction.
You can make a cash offer on a home when you want to get noticed above buyers who only have a mortgage pre-approval. Buying a home with cash is not only an excellent strategy when competing with many other buyers, but it also has other benefits. Cash sales account for only 36 percent of housing transactions, and this percentage varies dramatically by region. If your goal is to beat other bidders for a home, buying cash will attract the seller's attention.
In addition to saving on the lifetime cost of a mortgage, paying cash for a home can save money in other ways. Even though Serhant admits that paying with cash means you're spending less money, he doesn't recommend that option exclusively. Without a monthly housing payment, you can channel more money into income-generating investments, travel, or simply a better quality of life.