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Should I buy a house in cash?

You have probably seen the headlines about many wealthy people paying for their homes in cash, either to live or as investments.  Many aspiring homeowners have failed to buy these homes because sellers often prefer all-cash buyers since they do not have to wait for them to be approved for a mortgage(which, if does not materialize in time, the sale is off, and they have to find another buyer).

The reason why I think we should always have a mortgage (I do, even though, I have the cash to simply pay down the remaining mortgage on my home and literally own my home outright) is that unless you have a very high mortgage rate, you can get a higher return in the stock market.  That is why I might pay a small extra amount ($100 or so every few months) toward the principal, I like to keep my money invested.

What if the interest rates are very high?

This is what is happening right now.  In other words, you will pay a very high interest payment per month till interest rates come down to a more normal level of 3-4%.  Secondly, the stock market has been down due to high inflation and if we enter a recession, things could get ugly.  In other words, not only are stock portfolios down, it is likely that they will stay that way or could go down even further in the next couple of years.  Using that logic, you are better off buying a home in cash because hopefully the house will appreciate in the meantime and you will live in it (or make money by renting it out) for free.  The beauty of this approach is that when interest rates fall to your liking, you can always go get a mortgage.

What are other issues to consider when paying for a home in cash?

Think about these topics:

Investment goals: If you have other investment goals that require cash, such as starting a business or investing in real estate, it may make more sense to finance the home and use the cash for those investments.

Cash flow: Paying for a home in cash can reduce monthly expenses, which can improve cash flow. However, if paying in cash leaves you without an emergency fund or savings, it may not be the best option.

Tax implications: Paying in cash may result in lost tax deductions associated with mortgage interest payments.  Consult your tax adviser for this because right now the standard deduction is so high that most Americans do not take advantage of this.

Emotional factors: Some people prefer to own their home outright and avoid the stress of having a mortgage. In this case, paying in cash may be the best option.