Is paying in cash a good decision when it comes to purchasing a home? Are there any disadvantages if a homeowner fully pays his home at once?
Personal finance website Investopedia came up a list of pros and cons when it comes to fully paying a home at once. In their write up they mentioned that while there are advantages to paying in cash like making one an attractive buyer for a home seller, and shortening the buying process, it can also come with its own set of disadvantages.
“You’ll be tying up a lot of money in one asset class. If the cash required to buy a home outright represents most of your savings, you’ll be bucking one of the hallowed rules of personal finance: diversification. What’s more, in terms of return on investment, residential real estate has historically lagged well behind stocks, according to many studies.”
Check out the rest of the article here.
Advantages of Paying in Cash
Moneycrashers.com also shared the advantages and disadvantages of paying for a house in cash. One of the pros that they highlighted is the feeling of security especially when one suddenly gets into a highly stressful financial situation.
“If you lose your job or hit financial hard times, you cannot be foreclosed on since you already own the home completely. This means that regardless of how bad things may get financially, you are ensured a place for your family to lay their heads at night. Available Equity – Hit financial tough times? You will have total equity in your home that you have the ability to tap in an extreme emergency.”
Check out the rest of the advantages and disadvantages here.
The Balance meanwhile shared to homebuyers the benefits of paying for a home in cash. Foremost in the advantages that they mentioned is the greater convenience that it provides for both the seller and the home buyer.
“A buyer does not need 30 or 45 days to close if the buyer is not obtaining a loan. Once the home inspection and other contingencies have been satisfied or released, closing can take place in as little as seven days, provided that the buyer is willing to sign a lead paint waiver. A faster closing puts money into the seller’s pocket sooner. There are also fewer things that can go wrong in a short escrow period.”
Read the full article here.
A homebuyer should indeed carefully weigh his options when it comes to paying for a house in full.