I still remembered my college professor who is from Bangladesh said he will not buy a house until he has enough cash. I am sure a lot of people from Asia countries have the same mantality, I applaud that, but like any financial decision, there are pros and cons of paying cash for a house.
Pros:
1. You do not need a credit history.
2. You can probably negotiate a better deal.
3. You actually own the house. It's a big benefit psychologically.
4. You are not leveraged - Buying a house with cash means that if the value of the home goes down by 10% then the money you put in also goes down by 10%. The most you can lose is the amount of money you put in. In the case of a 20% down mortgage, if the house's value goes down 10% then you lose 50% of the money you put in because of leverage.
Cons:
1. Less liquidity. Buying a house with cash makes it harder to free up that money in case you need to use it. If you buy a house with cash, any new mortgages would be considered refinances and carry a higher rate than a first mortgage.
2. You are not leveraged - Leverage goes both ways, so if the value of the home goes up, then the percentage gain of an all cash buyer would be comparably lower than the person who purchased with a mortgage.
3. No tax advantage - Mortgage interest is deductible on income taxes in the United States. If you are in a high tax bracket that benefit lessens the bite of the interest by quite a bit. In contrast, buying a home with cash does not give you any tax deductions.
Original article: http://www.wisebread.com/the-pros-and-cons-of-paying-cash-for-a-house