Buying a house with cash explained

You can absolutely purchase a house with cash, provided you have enough cash to buy the property in question upfront. While most people typically only save enough for a home loan down payment, having the necessary amount of cash in your bank account could make you a more attractive buyer.

It’s important to note that when we say ‘cash’, we don’t mean physical currency – if you tried to buy a house with a suitcase full of banknotes, you’d most likely be suspected of attempting to launder money and end up attracting government and/or police attention. Rather, buying with ‘cash’ means to purchase your home entirely with money you yourself possess, instead of borrowing it from a lender.

The process for buying a house with cash won’t differ dramatically from the process of buying a house using a home loan. You’ll still be required to make an offer on the property, have it accepted, and then navigate the settlement process as per usual.

The differences between the two processes are largely found in what you manage to avoid by paying upfront with cash – not needing a home loan will generally cheapen and streamline your property-buying process dramatically. That being said, you’ll still have some closing costs to cover, including stamp duty and conveyancer fees among others.

First, it’s important to note that the seller may not want to negotiate their property’s purchase price with you, even if you are buying outright with cash. Depending on the current state of the housing market, they may be comfortable standing their ground and not feel obliged to haggle.

That being said, if the seller is open to negotiating with cash buyers, do your research by looking at what comparable properties in the area have previously sold for. Being able to make an unconditional offer on a property and pay cash to the seller ASAP may be enough leverage to secure a small discount on the home’s price.

A seller may be happy negotiating themselves, or they may leave the negotiation process to their real estate agent. If you’re not comfortable handling the negotiations yourself, you could potentially engage the services of a buyer’s agent to negotiate on your behalf.

The major benefits of buying a house with cash stem from avoiding the costs associated with applying for and servicing a home loan. By not taking out a home loan, you avoid application fees, origination fees and a slew of other expenses that come with taking out a home loan.

You’ll also have peace of mind knowing you don’t have to worry about foreclosure, interest rate rises or the amount of home equity you’ve built up in your property. If you buy your home outright, it’s all yours – and unless something goes terribly wrong and you have to sell the property, it’ll stay yours.

Making a home purchase with cash could potentially work against you if you’re looking to buy an investment property. This is because there are certain tax benefits you could take advantage of as a property-owner making interest-only payments on an investment property.

The main benefit available to property investors allows them to claim a tax deduction for 100% of the mortgage interest they’ve paid over the financial year.

Because of this, many property investors opt to take out an interest-only home loan, and subsequently can typically offset the sum total of their mortgage payments against their taxable income for the year.

If this is a property investment strategy you’re considering, buying a house outright with cash may not be the most appropriate choice.