My friend paid cash for a house and immediately regretted it. here’s why
It is a mistake that she still regrets today.
- Many buyers have resorted to cash payment for homes in today’s competitive market.
- This 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 it was time to buy a house. She was tired of wasting her money on rent (her words) and, even worse, dealing with an absent landlord who took a long time to sort out issues, like when her fridge broke down and she couldn’t. could not store perishables in his apartment. for several weeks.
Fortunately, my friend has a good job with a high salary. And she is also a good saver. Between her savings account balance and the money offered by her parents, she found herself in a position where she was able to make a cash offer on a house earlier this year.
His reasoning for paying cash was twofold. First, there wasn’t a lot of inventory where she was looking, so she figured if she paid cash for a house, it would give her an edge over other buyers. Moreover, she knew that mortgage rates were higher than they had been in a long time. And since she had money, she thought it was useless to spend so much money on interest.
But in the end, my friend regrets her decision to buy her house in cash. And now she is suffering the consequences.
The problem with cash payment
My friend practically emptied her savings account so she could forgo a mortgage and buy her house with cash. She left enough money to cover three months of essential bills, but that was about it.
Meanwhile, since moving into her home, she’s had to replace her water heater, buy a new washer and dryer, and deal with a host of minor but aggravating plumbing issues that she couldn’t. settle itself. As such, she dipped into her savings account several times and now she has enough money left over to cover about a month and a half of expenses.
It’s not an ideal place for her. Luckily, her job is stable, and since it’s fairly recession-proof, she’s unlikely to find herself out of work if economic conditions deteriorate.
But still, much of his safety net has disappeared due to a series of back-to-back home repairs. And now she’s worried that the next big fix that pops up will send her into debt.
Worse still, she cannot turn to her parents for additional financial help. Because they helped her with funds to buy a house, they’re pretty exhausted and can’t afford to write her another check anytime soon.
Prospective buyers should be careful
At this point, my friend cannot go back in time and undo her cash purchase. But if you’re looking to buy a house, you can avoid repeating the mistake.
As tempting as it may be to buy a home outright and not have to deal with a mortgage, it could mean reducing your cash reserves to an uncomfortable degree and leaving you with insufficient funds to deal with home repairs. and other emergencies. And so you might want to avoid making a cash offer, even if you have enough money in the bank to buy a house outright.
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