Purchasing a House With All Cash

Posted on January 30 By MLP Lending Guide

If you have large amounts of cash available, you may wish to consider purchasing a home with all cash. The best way to examine this situation is to look at it like an investment. However, the investment is not the house you would enjoy any appreciation of the house's value whether you obtained a mortgage or used cash. The investment is in the mortgage you would be escaping if you paid for your house with all cash.

If the house you wish to purchase is priced at $500,000 and you have that amount of cash currently available, let's say you have two options. You can get a 20-year fixed rate mortgage at 7%, or you can pay with all cash. If you go with the mortgage, think about all the money you'll spend over those 20 years in interest alone. If you pay with cash, however, you can consider those savings as an investment. Yes, you'll lose all of that cash, which is extremely liquid, but you'll have a mortgage-free house with no mortgage, and thus you can analyze the situation in terms of how much money you'll be saving.

Additionally, if your house has no mortgage on it, then you've actually got another method to obtain more liquid wealth. Since your home has no liens on it, you could obtain a home equity loan in a matter of days, and probably get more cash than you would have been able to get with a mortgaged house. Consider all these options when deciding whether to purchase a house with cash only.

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