If you have the cash reserves to buy your next house, it might be tempting to forego the mortgage process and use your savings, instead. You won’t have to worry about going through the mortgage process, you can generally close faster, and you avoid all of the interest paid on the mortgage. For the right clients, this makes a ton of sense, but for most, the benefits of a mortgage far outweigh those of buying cash.

For starters, the interest paid is, in most cases, tax deductible. Every year, it seems the tax code is reworked to take away tax deduction, making them a more and more important commodity going forward.

Next, you want to consider what you are even paying in interest. Interest rates are still at all time lows, meaning you can borrow money at super low rates. Low rates mean less overall interest paid. Now with the cash you saved by not buying the house outright, you can do anything. You can keep a large cash reserve, buy ownership in some kind of a business, or even invest the money. Now, the beauty of this plan is that you are able to get your money to work for you  rather than tying it up in a piece of real estate.

And since mortgages have no prepayment penalty, you could always pay it off should things change in the future.

If you have any questions about qualifying for a mortgage or what makes the most sense in your situation, please contact me. If you have anything to add about whether it is better to buy a house cash or mortgage it, please leave a comment.