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What are the pros and cons of buying a home with cash?

Asked by Trulia Jacksonville, Jacksonville, FL Mon Apr 15, 2013

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Christine Williams’ answer
Pros: typically more appealing to the seller, as there is no financing contingency & an appraisal will not be required, so if it is a bidding war, cash usually is best. Obviously, you will not have a mortgage.

Cons: you will not be able to deduct any mortgage interest from your taxes, you will need to budget your insurance and taxes, as you will receive an annual bill for both. If you elect not to have a private appraisal, you may pay more than the home is worth.
0 votes Thank Flag Link Tue Apr 16, 2013
The pros include peace of mind having no debt, no monthly payment. For investment property it is certainly less stressful when you have a month of vacancy.
The cons if buying investment property would be a lower rate of return on your cash. If you calculate your return using cash, then compare it to say 70% debt, in most cases you will have a better rate of return on your cash using debt. This in turn would allow you to purchase more properties. With a higher rate of return using leverage you would make more money with the same amount of cash. Your risk would also be spread over more properties. You also have the benefit of deducting the interest, further increasing your return. If you buy at a good price and the market keeps improving, you could also have the advantage of appreciation.

John D. DiPietro
Prudential Network Realty
Atlantic Beach Fl
1 vote Thank Flag Link Mon Apr 15, 2013
I see no cons of paying cash. You own your home outright, no mortgage payment and if you want to move, then you don't have to worry about an upside down mortgage. As far as the benefit of being able to claim your interest on your taxes, if you do the math, you will see that you save more not having a mortgage than you do having a mortgage and claiming the interest.
0 votes Thank Flag Link Mon Apr 15, 2013
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