Have you ever considered paying cash for your next home? While paying for a home outright may seem like an insurmountable hurdle, it is an attainable goal if you’re willing to put in the time and effort to do so.
You may not be able to purchase the sprawling Tudor you’ve had your eye on for years, but purchasing a ranch style home that needs some TLC or a modular home on a nice lot may fit easily within your range. Once you purchase your home outright, you can fix it up and sell it for a profit, or make the necessary upgrades to turn the house into a home.
Paying cash for a home can save you literally tens of thousands of dollars over the next 10-30 years in interest. Clearly, purchasing a home outright can be beneficial, but is it right for you?
Consider these benefits of purchasing a home outright, rather than financing the purchase through a lender:
1. No mortgage payments. You won’t ever have to make a mortgage payment again! Once you purchase your home, the only expenses incurred are maintenance, home insurance, property taxes, and possibly homeowners’ association dues.
- Considering that the average monthly payment on a home loan will fall in the range of $1,000 and $2,500 per month, you’ll be able to pocket this amount on a monthly basis.
2. Full profit. If you decide to sell the home, you’ll walk away with a profit due to the equity you build through appreciation and upgrades.
- When you sell a financed home, you’ll have to pay the bank first. And because the first years of your mortgage payments are designated almost solely to paying interest rather than principal, you’ll be lucky to walk away with even a small profit.
3. Financial freedom. After a few years of nixing a high mortgage payment from your budget, doors which otherwise wouldn’t be open to you are suddenly viable options.
- You can take a weekend trip to Tahiti on a whim, purchase a new car outright, enable your spouse to stay home with the children on a fulltime basis, and pay for your children’s private schooling without having to pinch pennies.
- Alternatively, you can continue living frugally in order to retire earlier than expected. After all, you’ll be able to fully invest in your retirement if your monthly expenses are minimal for the next 20 years.
Saving for the Purchase
If you have two incomes coming into the household, you can turn this dream into a reality by learning how to live on just one income. When you do, you’ll be able to set aside one salary strictly for this goal! In order to make this happen, you’ll likely need to trim down your monthly expenses to the bare necessities.
In order to completely eliminate the expense of rent and utilities, you may want to look into the option of moving in with a relative for a few years. Often times, parents are more than willing to welcome you into their homes for a few years, since it allows them to spend more time with you while you achieve a worthwhile goal.
If moving your family into grandma and grandpa’s house isn’t your cup of tea, follow the tips below to help you slim down your expenses and ramp up your savings!
- Move into a smaller home
- Rent out one or two bedrooms in your home to a responsible college student or young professional
- Move to a less expensive part of town where rents are heavily discounted
- Halve your grocery bill by using coupons
- Sell your car – use half of the proceeds to purchase an older vehicle outright and apply the other half towards savings
- Save your tax refund
- Choose to send your children to public school rather than private
- Get a second job
- Eliminate cable television and internet from your monthly expenses
- Trade your monthly cell phone bill for a prepaid phone
- Shop at thrift stores for clothing rather than retail stores
- Sell high-value collectibles
- Apply your yearly vacation fund towards your savings and visit tourist attractions in your own area
- When you near your goal, sell the home you currently own to make up the difference in price
While implementing the ideas mentioned above may be a tough pill to swallow, it’ll be worth it in the end. Once you achieve your savings goal, you can purchase a home outright and wave goodbye to high interest loans or empty rental payments.