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Should You Make a Cash Payment for Your Next Home?

You have just finalized the sale of your home, and now you want to move on. For once, you might have enough money to make a cash payment for your next home. But is this the right decision? You should keep in mind that purchasing a house in cash has its pros and cons. Here are some pertinent things to take note of.

Understand Your Goals

You should have a clear financial plan for the future. It will help you determine whether it’s a good idea to purchase a house in cash or to opt for financing. In this regard, the following questions should be on top of your mind:

  • Does buying a home outright benefit your financial goals?
  • Can you save money by buying outright?
  • Does making a cash purchase affect you in the future?


Planning for the future will help you sidestep possible pitfalls. For instance, buying a house outright makes sense if you want to avoid paying settlement costs or loan fees. However, if you choose to finance the home later, you will end up incurring these costs both as the buyer and the seller.

Your Current Financial Status

While deciding whether to buy outright or not, evaluate your current financial status. It’s sensible to set aside some cash to cover some of these possibilities, rather than spending it all on your home:

  • Set aside funds for retirement
  • Have enough money in a savings account to last at least six months in case of an emergency
  • Have sufficient life, disability, and health insurance


Making a cash payment for a home can limit your liquidity. This is particularly important if you need to send your kids to college soon, or you have to take care of an elderly relative’s living expenses. If your retirement age is looming, making a cash payment for a home will reduce your monthly mortgage expenses. You need to be sure that you have sufficient income from other sources to cover your living expenses.

Tax Considerations

How significant are mortgage interest deductions to your overall tax picture? This is one essential consideration that you must keep in mind. Generally, homes without mortgages have substantial tax deductions. Therefore, it makes sense to use your cash to pay off a non-deductible credit obligation rather than putting all of it into a home purchase.

Future Loans

No one can predict the future. Before buying a house outright, you should consider all the “what ifs.” The following questions will help you determine whether you might need to take a loan in the future.

  • How much monthly payments will you be comfortable making?
  • What loan would you be eligible for?
  • Is your financial situation likely to change, thus making you ineligible for a loan?

Consulting a lender might be wise since it will help you establish whether a change in your financial situation will make you ineligible for a loan in the future.

Investment Alternatives

You also need to consider how a mortgage affected your overall investment picture. Could other investment options provide higher financial yields with a similar level of risk? You shouldn’t overlook the fact that you will be making mortgage payments with after-tax dollars.

In today’s world, homeowners are always on the lookout for strategies that enable them to reduce their expenses. Owning your dream home free and clear can be the mentally and financially liberating experience that you need.

if you are searching for your dream house in the Las Vegas area, do not hesitate to contact us.