For many, the American Dream is owning a home of their own. With the current economic conditions, this is getting to be more difficult for many. On the other hand, there are some that sacrifice expenses for a period of time so that they can purchase a home with cash.
Following are some of the benefits of buying a home with cash:
Saving on interest costs
In many cases, if you have a 30 year mortgage once you figure the amount of interest you will pay over the life of the loan you will have paid as much in interest as the price of the home. With the low interest rates offered on savings accounts now, most people do not earn much on their savings accounts. Even though mortgage interest rates are considered low, if you do have money saved it may be beneficial to pay cash for a home or pay down your mortgage early. You will also save on some of the closing costs that are charged by the mortgage companies.
Getting a better deal
In some cases you may get a better deal on a property if the sellers know you can pay cash. You may have an easier time if there are multiple offers when you know how much you have in cash instead of dealing with mortgage companies and their fees.
Sense of security
Even though it is a sacrifice to save to either pay cash for a home or pay off the mortgage early, for some it may be worth the sacrifice. For many people it is a sense of security knowing that they do not owe any money on their homes.
If you do not owe anything or owe little on your home, you will have equity to borrow towards if some unexpected circumstances come up. It is not usually recommended to borrow against your home, but is an option if absolutely necessary. One downfall of borrowing against your home is that if you fall behind on the payments, you could end up losing your home.
If you do not have the expense of mortgage payments each month you can build up your retirement accounts or save for other investment properties. For some people, investing in rental properties is an option. If you purchase rental property and are able to pay it off, it can be a source of ongoing income in the future.