Re: Is there any disadvantage to buying a house outright?
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If you take out a mortgage and invest the money such that your rate of return is higher than your mortgage rate, then it makes sense to get the mortgage.
Taxes sort of cancel each other out since they reduce the cost of the mortgage, but they also reduce your rate of return by the same percentage.
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This is all you really have to ponder. Bizarrely, this is one of those rare financial decisions that is a lot easier than you'd think -- compared to rent vs own, for example, which can be be pretty complicated. The key is to keep in mind that once you've decided to buy, none of the factors like property taxes have anything to do with whether you pay cash or borrow money. You are just deciding what level of leverage you are comfortable with.
Anyway, if you put 20% down, you should get a rate well below your expected return on simply buying and holding an S&P index fund for the long run. So borrowing is a no brainer in that respect. But that's assuming you own the house for a long time.
That said, leverage is leverage, and you are increasing your risk, so the other side of it is simply your risk tolerance. My parents own their house outright and I told them it's dumb and they know in some respects I am right. But they don't care, the decision is based on their risk tolerance (very low).
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