I Paid Cash for a Home and Have Zero Regrets. Here's Why

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  • There are pros and cons to buying a house without a mortgage.
  • Paying cash for a home can mean less fees, no interest payments, and the security of being debt free.
  • However, it also means tying up money in property that could otherwise be used to build wealth through other means, such as stock market investments.

I'll never lose sleep over mortgage payments or rent again.

Buying a home outright may be a pipe dream for some, particularly given the degree to which housing prices have risen in recent years. However, as mortgage rates tick upwards, paying in cash has a lot of appeal. Particularly if you have money in the bank and want to avoid sky-high mortgage payments.

It isn't the right option for everybody. But for me, it made absolute sense and I haven't looked back. Here's why.

1. It made financial sense

I live in Bogota, Colombia where house prices are significantly lower than in many parts of the U.S. A mortgage wasn't an option as I'm a foreigner who works as a freelancer and has limited credit history. My house cost around $120,000, and I teamed up with a friend to jointly buy the property. With a favorable exchange rate and some financial help from our parents, together we had enough money to buy the house and still have cash left for repairs and renovations.

Buying with a friend isn't a typical scenario, but then neither is buying a property without taking out a mortgage. One of the big drivers for both of us was to stop spending money on rent and escape difficult landlords. It's kind of like paying 12 years worth of rent upfront, but with the benefit of actually owning a home and never having to worry about rent again.

2. We didn't have to pay origination fees -- and we got a better price on the house

The property market in Colombia works differently from the U.S. Here, paying cash meant we could negotiate the price down by more than 5%. It also meant we could finalize the deal quickly. In the red-hot American housing market of recent times, a cash offer hasn't necessarily carried the same benefits. However, if the property market cools off, American cash buyers may also find there's more space for negotiation.

Moreover, origination fees on a mortgage can come to as much as 1%. That's on top of things like appraisal fees and other costs you'll pay your lender. Cutting out the lender meant we didn't have to pay any of these extra fees. Moreover, there's no paperwork and a lot less hassle overall.

3. I like being debt free

Mortgage rates have increased recently, but even at the low rates of 2021, you'd still be committing to decades worth of interest payments. That can add up to tens of thousands of dollars of interest over the life of the loan. The money I would have spent on interest is instead going directly into my brokerage account.

That said, there is a very valid argument against tying your cash up in property. Let's say the interest rate on your mortgage is lower than the rate you could potentially earn by, say, investing in the stock market. In this scenario, taking out a mortgage and investing the cash could produce better results long term.

For example, last year, some mortgage lenders were offering home loans at rates of less than 3%. Historically, the S&P 500 has generated average returns of around 8% a year. On paper, it would have made sense to invest a lump sum in the stock market and take out a low-interest mortgage, assuming you qualify. However, for me, that's outweighed by the power of being debt free.

Buying outright means I'll never be in a situation where I owe more on my home than the property is worth, even if the bottom falls out of the market. There are no monthly payments I could somehow fall behind on -- so no chance of anyone foreclosing on my property. If I fall on hard times, I know I will always have a roof over my head.

This is the biggest reason why I'll never regret paying cash for our home. You can't put a price tag on the emotional security of owning property outright.

4. We had a decent financial cushion

One of the potential pitfalls of paying cash for a home can be winding up in a situation where you can't afford home repairs or renovations. When you buy a house, there's a good chance you'll have to pay to do a lot of renovation work in the first year or two. Our place wasn't a fixer-upper per se, but it did need a lot of work outright and we've had to do some big jobs since then.

We built a sizable cushion into our budget so that we've been able to pay for the first, second, and even third round of house repairs. Buying in cash only works if you don't stretch your initial housing budget so much that you can't cover the inevitable extras. You may be able to get some kind of home equity loan, but there are no guarantees. Plus, taking out a loan to cover renovations undoes some of the benefits of owning your property outright.

Bottom line

There are pros and cons to paying cash for a home, and a lot depends on your financial situation and your attitude towards money and debt. I have zero regrets because I value the stability and independence that comes with owning my home. Other people may not have the luxury of paying upfront, or may prefer not to have a large proportion of their money tied up in their home.

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