Paying Cash for a Home Is a Terrible Idea. Here’s Why I Did It Anyway

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Sometimes, life circumstances lead to money moves you otherwise wouldn’t make. 

Paying cash when buying a home is not the smartest financial move. In fact, even opting for a mortgage loan with a short pay-off timeline usually doesn’t make sense.

There’s a few key reasons for that. First, it’s hard to get money out of your home, so tying up a bunch of cash in an illiquid investment isn’t a great idea. Second, mortgage interest is usually pretty affordable (even at today’s high rates), and can be tax deductible so it’s usually a better idea to get a mortgage and invest your cash in other things.

Even though I’ve repeatedly written about why it’s not a good idea to buy a home outright, I had to do exactly that last year. My husband and I needed to purchase a property and we had to pay cash for it. Here’s why that’s the case — and why I don’t regret my choice.

Paying cash allowed us to get a better deal on a property

The biggest reason why paying cash on a property made sense for us is because doing so allowed us to be competitive in a seller’s market without having to pay more than our home was worth.

My husband and I had to buy a home during the heart of the buying frenzy and properties were routinely selling for above asking price. We didn’t want to get into a bidding war. Because we were cash buyers, though, we were able to get a good deal on a home that people needed to sell quickly. Our sellers needed to be out of the house ASAP because they were having disputes with the HOA, so they accepted our all-cash offer with a very quick closing date even though they could have gotten more for the property had they waited.

Since we didn’t have to wait for a lender or worry about an appraisal, our cash purchase made us competitive buyers despite not being willing to overpay — and that was worth it to us.

Paying cash didn’t prevent us from making other investments

One of the biggest reasons not to pay cash for a property is because of the opportunity cost. But my husband and I did not have to give up on our other investments when we paid cash for our home. We used the proceeds we’d made from selling another house to buy it.

Since we still had plenty of other money invested and weren’t reducing our deposits into our brokerage account, I didn’t worry about putting my future security at risk (or tying up cash I might need) by buying the house with cash.

We don’t plan to stay in the house for the long term

Finally, the last reason I didn’t mind paying cash is because we don’t intend to stay in this home for more than a few years. It is a temporary one while we wait for the market to calm down and for a house we really want to come on the market at a price we’re willing to pay.

When we move into our next house, we have the option to get out of this property, get our money back, and make a choice about whether we want to get a mortgage. Since I wasn’t tying up cash forever, I felt better about the choice.

My situation shows that sometimes money rules have to be broken — and it can make sense to do so. The important thing is to look at the pros and cons and decide what’s the best option for your personal circumstance, rather than just following conventional wisdom in every case.

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