If you can buy a house with cash, should you do it?
Most people try to avoid getting into debt; it’s a much wiser financial decision. Unfortunately, it’s not always possible. On big-ticket items such as higher education, purchasing a car, and buying a house, loans are a common occurrence. But if you can buy a house with cash, should you do it? What are the benefits of making a cash offer on a home or accepting a cash offer for your home?
Benefits of Buying a House with Cash
If you have the means to be a cash house buyer, then you’re in a great position. According to the National Association of Realtors, roughly 30% of U.S. homebuyers are making their home purchases completely in cash, and it makes sense.
There are many reasons why paying cash for a home is better than getting a loan, even when it comes to the effect of a cash offer on house closing costs.
No Mortgage Payments: If you purchase your new home outright, you won’t have to worry about what type of interest rate you get or how much your monthly payments will be. Instead, you can enjoy financial freedom without a mortgage. This also means that you’ll be saving money on interest. You paid for the house in full, so you don’t have to worry about thousands of extra dollars over the years in interest payments.
Lower Purchase Price: In most cases, sellers love for cash homebuyers. It makes everything easier on the seller’s end, which means that you can probably negotiate a better price. The seller will know that you won’t back out at the last minute due to loan issues so that you can haggle a little more.
Fewer Closing Costs: You might be surprised by the impact of a cash offer on house closing costs. Many typical closing costs have to do with a mortgage, but if you’re paying in cash, you can avoid various loan fees including:
- Property appraisal fees
- Notary fees
- Private mortgage insurance
- Credit report fees
Quicker Closing: With a mortgage, closing a home requires you to wait 30 to 45 days on average. Paying in cash, you can finish the purchase transaction in one to three weeks.
Quality Investment: If you have a large sum of money in cash, it won’t be earning you any extra sitting in the bank or a CD. On the other hand, real estate investment is a great idea, even when the market may not be ideal. If you’re willing to hang on to your property for a few years, you’ll get out more than you put in on a cash deal.
Benefits of Selling a House for Cash
What about when it comes to selling your home? Should you sell a home for cash or is it better to go the conventional route? Beyond the fact that there may be negotiating for a lower selling price for a cash offer, there are many benefits to accepting a cash deal.
Fewer Deals Fall Through: If you’ve ever tried to sell a house, you understand that it can be risky. Too often, buyers lose loan backings or don’t qualify for enough to complete the purchase. With a cash offer, you don’t have to worry about this as much.
Faster Closing: If you need to get out of your home quickly, a cash offer is a great way to do this. Normal closing times are four to seven weeks. A cash offer can cut that time down to one to three weeks.
Fewer Fees: Typically, a cash offer means that you’ll be able to avoid many annoying closing costs, so you keep more of your sale money.