Paying Cash for a Home

**mbrealtygroup** · 07-09-2010, 09:09 PM

Does anyone have strong convictions that paying cash for a home is the way to go? To be more specific, I'm referring to the idea (hypothetically) of renting for 15 - 20 years and meanwhile saving enough cash to plunk down on a home purchase.

I know in our society it is a general rule that "buying" is the way to go; however, it seems to me that buying with cash is an even better way to go.

My father paid cash for our family home (which was very elaborate) when I was a mere 5 years old. It's pretty incredible to think that the last 27 years he hasn't had any house payments (just taxes to Uncle Sam). One of the reasons he was able to pay cash was because he happened to buy and sell our old home in Kansas City, MO, at just the right time so that when we moved out West that equity along with savings was sufficient to cover the cost of their dream home.

Another relative is renting a home in one of the most expensive cities in America, and he's paying a LOT for rent. Is this the new thing to do?

Any other thoughts on this? I really appreciate hearing lots of different angles on such ideas so I can better serve the people I talk to. Thanks!

**clemy** · 07-11-2010, 11:03 AM

To be more specific, I'm referring to the idea (hypothetically) of renting for 15 - 20 years and meanwhile saving enough cash to plunk down on a home purchase.

With a long time-line like this you need to work out the numbers. Will the total rent paid during that time really be less than the interest on a 15 year mortgage? The interest on a mortgage is really rent payment for the cash used to buy the house. So, do you rent the money or the place to live? And then, will the people really be able to save the money for the house after paying rent, food, utilities, and extras? You can look at a mortgage as an enforced savings plan. Part of the payment is rent for the money and part goes to pay for the house.

I know in our society it is a general rule that "buying" is the way to go; however, it seems to me that buying with cash is an even better way to go.

Only if you have the cash and no better way to invest the money -- another long discussion topic is whether money "trapped" in home equity is better than money earning higher interest elsewhere.

**SallyStrumbo** · 07-16-2010, 11:33 AM

It all depends on how long it will take you to save the money and if you can rent a place cheap enough. To each his own, but I prefer to pay cash for anything possible.