Thursday, May 13, 2010

Paying cash for a house

I keep reading about people saving to pay cash for a house and it has led me to wonder if it is really possible. Where I live house prices have gone up in the last year quite considerably, which makes me think it is not doable here, but that doesn’t mean it’s impossible.

I have been watching house prices here and in the last 12 months I have seen some properties be bought at the start of that 12 months and be resold recently for $50,000 - $80,000 more. If they keep going at that rate I can’t see myself paying cash for a house here.

The idea of paying cash is awesome though. No interest on the house so the price you pay is really the price you pay, not 4 times more once you add in interest. No mortgage or account keeping fees, no running around trying to find the best mortgage deal. It makes a lot of sense if you can do it.

I would love to pay cash for a house and even though I don’t see it happening here, there is no reason I couldn’t do it elsewhere. There are plenty of other parts of Australia and the world that are still affordable. Sure, I won’t be living in it, but a rental where the only things you need to pay for the rent are insurance, rates, water and repairs is much more appealing than one where you only get $10 a week don’t you think?

I am so intrigued by this that I have set it as one of my goals. I would love to do it here, but I honestly know I would not be able to stand living in a 1 bedroom rental until I can afford it, so it’s not something I will be able to do for my home, but it is something I would be interested in doing at a later date for another property.

It begs the question though, what are you willing to sacrifice now to have no mortgage? Could you give up all take-away and eating out? Going to the movies, DVD hire etc... Would you live off porridge and lentils? How far would you and could you go without feeling like you are giving up your life?

I know there is lots I could do to cut back so I can save more for a house. I am just not always motivated enough. I've said before one thing I do for motivation is look at open homes so this weekend I am going to go to some open homes and stick the pictures up around my house to help me keep my eye on the prize.

Are you saving cash for a house? What are some of your tips? (thanks to all those who commented and left tips on my motivation post, great ideas!)

3 comments :

  1. Hmmm. It's a tough one.

    One one hand, there would be such freedom in not having a mortgage.

    But on the other hand, life is flying by, and your kids are growing up, while you are busy scrimping and saving and working madly, to save up for the house.

    What if you worked like the devil, and by the time you managed to pay cash for the house, your kids were getting ready to leave home? Would you feel like you missed out on so much, and was it really worth it?

    Unless you are on a phenomenal income, or earning fantastic interest on your savings, house prices will probably rise quicker than what you can save.

    Just my thoughts, but I'd be interested to hear other points of view...!

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  2. I agree that saving the whole amount will see prices rise, but when you see how much most people pay in interest it would just depend how long it took really ... I read that book about paying off mortgage in five years *lurve it* and have been trying hard ever since!

    We don't go 'without' we just buy more second hand/ cook more etc and besides most people live more hand to mouth than us and we live on lots less! In the long run I won't be a slave to my mortgage, and that is worth it too me!

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  3. Hi there

    I am currently saving up to pay cash for a block of land in a regional area, i am looking at saving around $50K, which i am hoping i can do in the next 3 years. I daresay by the time i have the money the prices will have increased, but for no mortgage, and no hope of getting one, then this is really my only option.

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