Paying Cash to Buy a Home Has Benefits
Oh, you'll find plenty of financial advisers who are dead-set against paying cash for a home. These experts argue that you would receive a better rate of return by investing your money elsewhere. And generally, dollar-for-dollar, they are correct. If you were going to pay $200,000 cash for a home that appreciates at 3% per year, you just used $200,000 to make $6,000.
But for many cash buyers, a sense of security is more important than rate of return. Besides other benefits, cash buyers have 100% equity walking out of closing, which is tapable for emergencies . . . read more about Paying Cash for a Home.
More Articles by Elizabeth Weintraub:
- At What Point Do You Make a Purchase Offer?
- How to Choose Your Home Offer Price
- When Two Offers Happen on the Same Listing
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Comments
Wouldn’t it make more sense to compare the cash investment to the cost of the mortgage as compared to the appreciation of the house. If someone uses $x in another investment instead of paying for the house in cash, the return hurdle would be the cost of the money being borrowed (the mortgage — say 6.37%)
Hard to calculate the amount of a mortgage that doesn’t exist, but you could certainly come up with a number.