I talk to a lot of homebuyers as part of my work and one thing that always surprises me is how differently people with similar financial situations approach this decision.
Last week alone I spoke to two buyers. Both had enough funds to buy their flat outright without a loan. One decided to pay everything upfront. His logic was simple, I don’t want to owe anyone anything for 20 years, the mental freedom is worth more than any return on investment. He just wanted to be done with it.
The other person took a full home loan even though she could have paid cash. Her take was why would I put all my money into one illiquid asset when I can keep it working across mutual funds and equities and let the bank fund the house at 7.25%. She was very clear that the math favoured leverage.
Both were smart people. Both had thought it through. And honestly both made valid points. There’s no clear winner here.
What would you do if you had the full amount? Pay up and own it clean, or still take a loan and keep your money invested?
I think this decision is really math vs psychology.
Financially, taking a loan can make sense if your money could earn more in investments than the interest you pay on the loan. But the peace of mind of owning your home outright is something spreadsheets can’t measure.
For me, the real question becomes “how much leverage you’re comfortable with ?”
Personally, I would still take a home loan. Putting all your money into one house feels risky to me. I’d rather keep some money invested and maintain liquidity.
If I had the full amount, I would probably just pay for the house outright. Being debt-free gives a lot of peace of mind, and you don’t have to worry about EMIs for the next 20 years.
I was actually in the same dilemma recently. In the end I felt that if the money is available, buying the house outright gives more peace of mind. Not having to think about EMIs for years just feels simpler.
One thing I also think about is flexibility later. If you use all your money to buy the house, it becomes harder to move or upgrade if plans change in a few years. Taking some loan keeps options open while still owning the property.