My Friend Paid Cash for a Home and Regretted It Immediately. Here's Why

It's a mistake she's bemoaning to this day.

Earlier this year, a friend of mine decided that the time had come to purchase a home. She was tired of throwing her money away on rent (her words), and, worse yet, dealing with an absentee landlord who took a long time to address issues, like when her fridge broke and she couldn't store perishable food in her apartment for several weeks.

Thankfully, my friend has a good job with a high salary. And she's also a good saver. Between her savings account balance and some gifted money from her parents, she wound up in a position where she was able to make an all-cash offer on a home earlier this year.

Her reasoning for paying cash was twofold. First, there wasn't a lot of inventory where she was looking, so she figured that if she paid for a home in cash, it would give her an edge over other buyers. Plus, she knew that mortgage rates were higher than they'd been in a long time. And since she had the cash, she figured there was little point in spending so much money on interest.

But ultimately, my friend regrets her decision to purchase her home in cash. And now, she's suffering the consequences.

The problem with paying cash

My friend pretty much emptied her savings account to be able to forgo a mortgage and purchase her home in cash. She did leave herself enough money to cover three months' worth of essential bills, but that was about it.

Meanwhile, since moving into her home, she's had to replace her water heater, get a new washer and dryer, and deal with a host of minor but aggravating plumbing issues that she couldn't tackle herself. As such, she's dipped into her savings account numerous times, and now, she's left with enough cash to cover about a month and a half of expenses.

That's not a great spot for her to be in. Thankfully, her job is steady, and because it's fairly recession-proof, she's unlikely to become unemployed if economic conditions sour.

But still, much of her safety net is gone due to a string of back-to-back home repairs. And now, she's nervous that the next big repair that pops up might drive her into debt.

Making matters worse is that she can't turn to her parents for additional financial help. Because they helped her out with funds to purchase a home, they're pretty tapped out and can't afford to write her another check anytime soon.

Future home buyers need to be careful

At this point, my friend can't go back in time and undo her cash purchase. But if you're looking to buy a home, you can avoid repeating her mistake.

Tempting as it may be to buy a home outright and not have to deal with a mortgage, doing so could mean whittling down your cash reserves to an uncomfortable degree and leaving yourself with inadequate funds to tackle home repairs and other emergencies. And so you may want to avoid making a cash offer -- even if you have enough money in the bank to purchase a home outright.