Does buying a house with cash make sense?

Paying cash for a home eliminates the need to pay interest on the loan and any closing costs. Lenders don't charge mortgage opening fees, appraisal fees, or other fees they charge to evaluate buyers, says Robert Semrad, JD, principal partner and founder of the Chicago-based bankruptcy law firm DebtStoppers. Paying everything in cash for a house may make sense for some people and in some real estate markets, but be sure to consider the disadvantages as well. There are several things that make buying a home with cash attractive, but the most basic is peace of mind.

If you pay for a house in full, it's completely yours. That means there's no need for funding from a bank or other lender, no debts or mortgage bills every month. You'll always have a place to live and there's no risk of late payments or foreclosure. In addition, it says that 49 percent of real estate agents surveyed have seen buyers apply for a home equity loan or home equity line of credit for this purpose, and 38 percent of agents have seen buyers obtain short-term loans from friends or family.

If you're still not sure if you want to make a cash offer or get a mortgage, talk to a real estate agent in your area. Paying for a home in cash means that the buyer will transfer the money or issue a cashier's check on the closing day instead of going to a mortgage company. The IRS doesn't care that someone bought a house in cash, except in the rare case that someone owes back taxes and the IRS wants to establish a lien on that person's assets. However, for a buyer, there is a significant difference between paying cash for a home and seeking financing through a mortgage company.

In addition to saving on the lifetime cost of a mortgage, paying cash for a home can save money in other ways. If you want to continue with a cash purchase, it's also a good idea to include other professionals in the process, such as lawyers and real estate agents. Even when the advantages of buying a home with cash outweigh the risks, cash buyers must exercise due diligence when making their purchase. Sometimes, a seller doesn't accept a cash offer and instead chooses another buyer who needs to get a mortgage from a lender.

If the value of your home decreases, you may lose more, in percentage terms, if you have a mortgage than if you had paid in cash. While you can buy a house with cash, carrying so many paper bills and meeting IRS reporting requirements for such large cash transactions isn't very realistic. While many more Americans of retirement age have housing debt than they did 20 years ago, according to data from the Federal Reserve, many financial planners and retirees see at least one psychological benefit from retiring debt-free. To get the benefits of making a cash offer without having to invest all the money in your home, delayed financing could be an attractive option.

Buying a home with cash has many benefits, such as making your offer more attractive to sellers. Another great advantage of buying a home with cash is that buyers have more control over the transaction.