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My Friend Paid Cash for a Home and Regretted It Immediately. Here’s Why – The Motley Fool

Image source: Getty Images

It’s a mistake she’s bemoaning to this day.

…….

Image source: Getty Images

It’s a mistake she’s bemoaning to this day.


Key points

  • Many buyers have resorted to paying cash for homes in today’s competitive market.
  • Doing so could leave you in a tight spot with little savings, so you may want to consider financing a home purchase using a mortgage instead.

Earlier this year, a friend of mine decided that the time had come to purchase a home. She was tired of throwing her money away on rent (her words), and, worse yet, dealing with an absentee landlord who took a long time to address issues, like when her fridge broke and she couldn’t store perishable food in her apartment for several weeks.

Thankfully, my friend has a good job with a high salary. And she’s also a good saver. Between her savings account balance and some gifted money from her parents, she wound up in a position where she was able to make an all-cash offer on a home earlier this year.

Her reasoning for paying cash was twofold. First, there wasn’t a lot of inventory where she was looking, so she figured that if she paid for a home in cash, it would give her an edge over other buyers. Plus, she knew that mortgage rates were higher than they’d been in a long time. And since she had the cash, she figured there was little point in spending so much money on interest.

But ultimately, my friend regrets her decision to purchase her home in cash. And now, she’s suffering the consequences.

The problem with paying cash

My friend pretty much emptied her savings account to be able to forgo a mortgage and purchase her home in cash. She did leave herself enough money to cover three months’ worth of essential bills, but that was about it.

Meanwhile, since moving into her home, she’s had to replace her water heater, get a new washer and dryer, and deal with a host of minor but aggravating plumbing issues that she couldn’t tackle herself. As such, she’s dipped into her savings account numerous times, and now, she’s left with enough cash to cover about a month and a half of expenses.

That’s not a great spot for her to be in. Thankfully, her job is steady, and because it’s fairly recession-proof, she’s unlikely to become unemployed if economic conditions sour.

…….

Source: https://www.fool.com/the-ascent/mortgages/articles/my-friend-paid-cash-for-a-home-and-regretted-it-immediately-heres-why/

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