How to Buy a Home WITHOUT a Mortgage in 2019

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I think you’ll agree with me that making a house payment each month sucks.

There was a time that I didn’t even think it would be possible to buy a house without a mortgage. I thought the only way I will ever own my home is to borrow money.

Man, was I mistaken! Looking back at all of the interest I have paid to banks makes me sick. I knew there had to be another way, and there is. Here is an example of how you could actually make buying a home in cash a reality.

How You Can Buy a Home Without a Mortgage

Let’s start with a hypothetical scenario of a young couple who want to pay cash for a home purchase.

John and Kristy get married at 22 years old. John has a job paying $40,000, and Kristy is a teacher making $30,000. So, combined, they have an income of $70,000 per year.

They decide to live as cheap as they can until they can afford to buy a house with cash. They rent an apartment for $600 per month and decide to take very inexpensive vacations over the next five years.

In addition, they implement a challenge everything budget and maximize frugal living. By doing this, they are able to live on $40,000 per year, which allows them to put about $30,000 into savings each year.

So in five years, they can save up $150,000 and pay for a house with cash!

And that doesn’t include their interest earnings on their savings! If you open a high-yield savings account, you could increase your savings with a 2% rate of return or more – all insured by the FDIC.

John and Kristy have accomplished a lofty goal. At age 27, they own a paid-for house and are completely debt-free.

Living La Vida Frugal

But wait, how can I live on $40,000 per year with taxes, rent and everything else I have to pay??? Glad you asked, here is a breakdown of what that would look like:

If you think that couples story is crazy, check out people that are living on even less:

Now, no one said it’s going to be easy to live a super frugal life. You’ll have to find free things to do on nights and weekends. And you’ll have to work hard to save money on groceries.

Also, you’ll have to find somewhere to live for cheap. A $600 rent payment is a lofty goal – especially in geographical areas like the East or West coasts. You might have to room in someone’s basement or pay rent to the bank of mom and dad for a time.

But in the end, we think you’ll find it’s worth the sacrifice.

Why Should You Pay Cash for a Home?

It might sound crazy to save up cash to buy a home without a mortgage. However, have you ever thought about the total interest that you would pay if you took out a 30-year mortgage?

Think about this from a math perspective: If you borrowed $250,000 at 4% interest on a 30-year note, you would pay $179, 673 in interest! That is $10,000 per year in interest for roughly 18 years.

I don’t know about you, but I would rather backpack Europe every year for 18 years than pay a bank that much interest.

What could you think of to do with $180,000 besides pay it to your local bank? I could think of a few things:

  • take awesome vacations regularly
  • save up for a cabin or vacation home
  • start a business or ministry
  • achieve financial independence and retire early

Your list of what you would do with $180k might look different than mine, but I bet you can think of something.

Well, that is great, but I already have a mortgage. What should I do?

Don’t worry; I have you covered. Check out this mortgage calculator to see what your savings would be if you had a shorter term.

Then make a plan. Here are some things you can do to get extra cash to put toward paying your mortgage off faster.

How to Pay Your Mortgage Off Fast

Implement one or more of these ideas to get your mortgage paid off fast. Remember to clarify when making extra payments to your mortgage company that you want them to go toward your principal balance.

Get a Side Hustle

A side hustle is an extra source of income. We’ve got a list of dozens of side hustle ideas for you.

But here are some quick ideas. You could get a second job delivering pizzas, waiting tables or working in retail. Or you could start your own side hustle business.

How about:

  • freelancing with a skill you have, such as writing or graphic design
  • starting a handyman or lawn mowing business
  • babysitting for kids or pets (you could add a profile on Care.com to find clients)
  • doing tasks for people with companies like TaskRabbit
  • Driving for Uber or Lyft
  • Renting out a room in your house on Airbnb

It’s easy to find ways to make extra money. The key is committing to putting all of that extra money toward your mortgage balance.

Cut Your Expenses Drastically

If you’re willing to start living very frugally, you could save hundreds or even thousands of dollars per month on your expenses.

Cut costs on groceries. Use less electricity. Drive less or trade your expensive car in for cheaper transportation.

Go through every line item in your budget and find a way to reduce or eliminate it. Then use the money you save to put toward your mortgage payoff.

Downsize

If you really want to fast track to a life with no mortgage, you could consider downsizing. Is it possible for you to find a cheaper house and immediately get you a lower mortgage balance?

Only you can decide whether downsizing is the right move for you. But it is one way to get a mortgage-free life faster.

Refinance Your Mortgage

If you have a higher interest rate or a longerterm left on your mortgage, refinancing might help you pay it off faster.

Doing so could save you thousands in interest and in the time left on your mortgage loan. Contact a loan officer for more information.

Summary

Buying a home with cash is a valid and achievable goal. So is paying off your house early if you already have a mortgage. With a little ingenuity and hard work, you can be mortgagefree.

Yes, doing so will take some planning, hard work and sacrifice. But the work will be worth it when you’re living in your home and owning it outright.

Would you like to have a paid-for home someday? Would you consider buying a house without getting a mortgage?

52 COMMENTS

52 responses to “How to Buy a Home WITHOUT a Mortgage in 2019”

  1. LD says:

    The discipline sounds tough, but I bet the pay off is really nice.

    • Deacon Hayes says:

      That is so true. We don’t have a paid for house yet but we plan to pay it off in 6 years. It is difficult to stay disciplined at times, but I am sure that it will be worth it when we won’t have to make a mortgage payment anymore. 🙂

      • Elder Morris says:

        Amen! Think positive! Do not listen to the negative… go for it! My wife and I are going to do it using our retirement funds! Everything nice!

        • Deacon says:

          That’s one way to do it. Just make sure you aren’t paying steep penalties. Some retirement accounts allow you to borrow from yourself, so to speak. Then you are essentially paying yourself back. Just treat it like a rent or mortgage payment!

  2. Deacon,

    This is a fantastic post! Holly and I were just talking about this yesterday. We posted about how we are paying off our mortgage early and got a little bit of negative pushback, as expected. It is as if some people don’t realize that you actually CAN buy a house with cash. It is possible. Financing is so ingrained in our way of life that some people look at you like you’re a lunatic for going off the “prescribed” course. Great post!

  3. Pauline (@RFIndependence) says:

    This is a great challenge, even more achievable today with the collapsing prices of real estate. Don’t know about the median home price in your area, but I sometimes look at houses under 100K in GA or TX, and you can get great properties! Your example couple could totally make that kind of money over there, and buy a house after 3 years!

    • Deacon Hayes says:

      You bring up a great point. It is relative to where you live. In some places you can buy a house for $50k and in other cities it could cost you $250k for something similar. If you don’t mind moving, considering a state with lower real estate costs like GA or TX isn’t a bad idea.

  4. whitney4110 says:

    Wow! I wish we would’ve done this. We were making about $75K (and I’m a teacher) before we had kids. We were living in an apartment and even down-sized to a 1/1 just to save money before buying a house. The problem was that we had no budget and had no earthly idea where our money was going. It would be awesome to not have a mortgage, especially since we’re paying $570 per month for childcare. This is a great post.

    • Deacon Hayes says:

      Whitney, you are so right. Having a budget is key to making this happen. You’ve got to have a financial game plan and stick to it to achieve your long term goals. Thanks for the comment!

  5. callmewhatyouwantevencheap says:

    Buying a house without a mortgage is my goal! I’ve purchased two homes, sold one and paid off the other. I plan to buy another home in about a year and pay cash. I can’t even describe how great it feels to not have a mortgage.

    I am currently saving my old mortgage payment. I figured since I was living without it for so long, why not continue to do so.

    • Deacon Hayes says:

      That is great to hear that you are completely debt free! I think it is awesome that you are able to put your old mortgage payment into savings. Thanks for sharing!

    • Desmond says:

      So, it’s possible to buy house without mortgage? Please, are you an agent? I want to buy a house, and I need all the procedures and guidelines. Do you have any advice?

  6. Kraig @ Young, Cheap Living says:

    This is great stuff. I hope to buy a home without a mortgage someday. I’ve been living on half of what I make for a couple of years now and my goal is continue it. I’m 28 years old and have set goals for age 31 to be able to buy a home in cash, if I want to. I want the option at that point. I have other ideas on what to do with the money if, at that time, the timing isn’t right. Again, this was a great post and very inspiring!

    • Deacon Hayes says:

      Kraig, that is an awesome goal! To be able to have the discipline to live on half of your income is admirable. Way to set a great example!

  7. Andrea says:

    One of my goals in life is to pay cash for some of the big things like a car and a house. I definitely think it’s possible. I’m trying as hard as I can to live on half of what I earn right now, including vacations, just to get rid of my debt (house debt only left now). Then I can save and just pay cash. Man does it feel good to throw down money and pay for something in full!

    • WellKeptWallet says:

      Andrea, that is an awesome goal! We actually paid cash for two cars this year and it does feel good to not have to borrow from anybody. Keep me posted!

  8. TB at BlueCollarWorkman says:

    It’s true that it is possible to buy a house without a mortgage. I think the $600/month rent won’t work in some areas, but it’s amazing how you can stretch a buck if you need to! My wife and I saved a lot so that we could put a huge down payment on a house. While we still needed a mortgage, we needed less of a loan than if we hadn’t saved at all. So, even if you can’t pay entirely in cash, you could certainly get close!

  9. Cynthia Skelton says:

    I have been living on less than $25k for several years. I was just able to buy my first house a couple months ago. I do have a mortgage, but I bought a cheaper house and my mortgage is just over half the amount I was paying in rent. I am putting that extra money each month onto the principal to pay it down faster.

    It is possible to save for the future even when you have a small income. It is hard, but if it means a lot to you, you can do it.

    • WellKeptWallet says:

      That is great to hear! We are paying down extra on our mortgage and are planning on having it paid off in 5 years. Can’t wait!

  10. Goldeneer says:

    This is a good post applicable to today’s US market. I think it is feasible to spend minimally for a few years in order to save up the full amount for a house only if real estate inflation remains steady or drops as it has in the US. I don’t believe this would work when real estate picks up again.

    This concept would not work for me due to property steadily increasing in value. In my city, the entry townhouse price is $300k while the housing price averages 6% annually. This means that one would have to save $18k on top of 1/5th of the original price to keep up with inflation.

  11. Gen Y Finance Journey says:

    My only issue with this is that retirement savings and savings for things other than the house aren’t accounted for. I would rather take a loan to buy a house than spend every penny of my savings to buy the house in cash.

    • Deacon says:

      You bring up a really good point. This scenario works much better if you are 22 then it does if you start saving for a house at 40. It does depend on where you are in life and what your financial goals are. The goal of this post is to inform people that it is possible to save up and pay cash for a house. It’s not for everyone, but just imagine what that what it would be like to own a home and be completely debt-free at 27. Wouldn’t that be something?

  12. Her Every Cent Counts says:

    Where do houses cost $150k? Here, a basic 3 bedroom house would be $900k. So, this only works where the housing prices are cheap.

    • Deacon says:

      Well I can tell you that you can buy plenty of house for $150k in Phoenix, AZ. I am sure it depends on where you live, but typically if the median price of a house is $900k than the median salary to pay for it is MUCH higher as well.

    • Hannah says:

      She’s probably talking about California, and, no, the salary is the same still! There is a huge gap, and it makes it impossible for people to own a home.

  13. Dan says:

    Lets not forget that there is no such thing as rent free living. You ALWAYS pay rent, even if it is just to the state in taxes. And if you live in TX like it I do, property taxes are HIGH.

  14. Charles Kindred says:

    I’m trying to learn how I could own a house without paying a mortgage.

    • WellKeptWallet says:

      I’m glad to hear it, Charles. Buying a home without a mortgage is something that very few people do.

  15. Kim says:

    This is excellent. My generation is so spoiled. We think it’s necessary to buy expensive jeans and always go out for expensive glasses of wine. When people have kids they think they need a massive baby carriage and an SUV. My parents bought a house and paid it off in 7 years. For a while they couldn’t afford milk, used water in their baking powder biscuits, and had no furniture.
    I am currently living in Andalucia. I have friends who heat their houses with simple, homemade solar powered devices. They plan to catch rainwater and purify the rest so as not to pay for water either. There are a lot of things one can do. I am currently trying to figure out how I can buy a very cheap house here (30,000€) but the money I make is so small (maybe 500€ a month). I am living a very different lifestyle and there is not much I can cut out. I need to find an alternative kind of non-bank that will not charge me interest.

  16. sam says:

    Surely if you can find a mortgage with repayments lower than your rent it makes no sense to not get one? I used to want on principle to avoid all debt but seeing that I could just treat my mortgage as “rent” that maybe one day ends in owning a house made it seem less logical to avoid it. If I don’t pay it all I lose is my home which is exactly what I’d lose if I didn’t pay rent.

    • Deacon says:

      Hi, Sam. I can totally understand where you are coming from. It definitely makes more sense to get a mortgage if it is cheaper than renting since you will stop having to make the payment at one point. However, if you could find a way to pay cash for a house, this could save you hundreds of thousands of dollars.

  17. Kathleen D says:

    This is a great post! If all prospective first time home buyers read and digested your advice they would avoid a lot of financial trouble down the road.

  18. Philip says:

    How do you pay only $150 a month for utilities? That’s almost how much it costs just for internet around here.

    • Deacon Hayes says:

      We paid that for a 1,300 square foot place and I am sure different cities are less expensive than others. Two things you can do to reduce your electric bill would be to make sure every door and window are sealed and buy a programmable thermostat. This could potentially save you $20 – $50 per month. By the way, we currently pay $43 for high speed internet. You may want to call around and see if you can get a better deal on your internet.

  19. GENEICE MAXSON says:

    How do I buy a house with no mortgage?

    • Deacon Hayes says:

      The best way is to live on a super tight budget, work extra hard to make more money, and the pay cash for a home. If you have a dual income family that makes it easier to buy a home even faster without a mortgage.

  20. Sophie says:

    This still didn’t tell us how to buy a house. Do we pay with PayPal, a credit card, or fill a suitcase with cash and give it to the seller?

    • Laurie Blank says:

      I guess the easiest way would be to keep the money in your high interest earning bank account and to write a check at closing.

    • T. Nelson says:

      It’s simple. You put the cash in the bank. You get a cashier’s check for the full amount and provide it to the sellers at closing. You sign about 3 documents, and the house is yours.

      I’ve been there and done that. Now it’s worth nearly 3 times what I paid.

  21. David says:

    They’re idiots. They’re forced to pay TAXES to the IRS.

    The best tax bracket they could possibly get is 25%-28%. Depending on what state they live in they might get 5%-10%.

    After other misc fees and taxes they, like most middle class people, are extorted (see: slavery) by the IRS for 1/3 of the year. For another 1/3 of the year they work for free, and for the remaining 1/3 of the year they are SLAVES (i.e. someone forced to work for free under duress). This system is what ultimately replaced slavery in 1913 AND is more effective than slavery.

    This means it will take them 15-22 years @ 40k in expenses (assuming no salary increases or emergency’s) to save $150,000.00 for a “house” (assuming they can even FIND a house in a non-crime ridden community). This doesn’t take into account:

    1) The rising cost of living.
    2) Real Estate appreciation. (a house in a nice community for 150K 20 years ago is typically 800K-1 million TODAY)

    This has been done intentionally to make everyone:

    1) Slaves on the masters rental plantation (i.e. they rent for life. Can’t pay? They’re homeless)
    2) Slaves to the banks (i.e they PAY for life. Can’t pay? The banks take their house and they lose EVERYTHING they put into it)

    All of these people just reacted emotionally to this article. EMOTIONALLY. Not logically. Not skeptically. EMOTIONALLY.

    Please re-read my comment if you’re still confused. Thank you.

    • Deacon Hayes says:

      Hi David,

      I appreciate your thorough response in regards to paying cash for a house. To be clear, paying cash for a house is better for you financially than getting a mortgage on a house.

      You are correct in that it would mean that you don’t get the tax deduction, so you will pay more in taxes. However, you will ultimately come out ahead because you are not paying interest to a bank which would be far greater than the tax savings.

      For example, if you pay $1000/month in interest you would save $280 in taxes assuming a 28% tax bracket. You are still negative $720 in this scenario.

      If you just pay the 28% (which really isn’t 28% because we have a progressive tax system, but we’ll use it to simplify things) you would only pay $280 in taxes. So, you are better off because you have $440 more in your pocket per month than in the first scenario ($720-$280).

      I hope that helps clarifies things.

      • John says:

        I not sure I agree that buying a house with cash is always better for you financially. Take a look at your numbers above. Lets assume the couple has an emergency savings and is funding a 401k (your 20s

        In the case of the couple who has $30k per year in money to put into savings and $7200 to put towards rent, this is $3100 available per month. Neglect down-payment and PMI for the time being. Even with an interest rate as high as 8.5% I can pay off a 150k loan in 5 years with a monthly average interest that is LESS than the $600 monthly rent payment. In 5 years, at 8.5% and $3100 a month, I have a house paid off at an interest cost of ~$34k.

        If I save $2500 a month for 5 years ($600 to rent), invested at 6% (maybe more, maybe less), I’ll have $~174k in 5 years. However, my $150k home has appreciated to ~$174k (maybe more, maybe less) versus the case where I bought with a mortgage 5 years ago. I can still buy the house cash, but at a total rent cost of $36k – $2k MORE than my interest cost. So, I could have bought the house 5 years sooner for $2k less and built those family memories. Of course, you do have more risk with a mortgage, which we cannot neglect. Is that $2k and extra 5 years worth the risk?

        Lets go further. Today’s interest rates are around 3% for a 10 year fixed rate loan. Using the same numbers, I would pay off the $150k house in 4 years and 3 months at an interest cost of just $10k. So, I am debt free sooner and saved myself $26k. Is that worth the mortgage risk? For me it probably is.

        Of course, we also need to talk down payment and PMI. The above assumed 0% down, no PMI. For ease, lets save $2500 for 12 months and rent for $600. I now have a down payment of $30k. My $150k will probably cost $154.5k, so I am close to 20% — no PMI. I mortgage and pay $3100 a month towards the house @ 3% interest. I will pay off the house 6 months shy of 5 years total with a total interest and rent cost of $14k – less than half than that if I just rent for 5 years and pay cash. Plus, I get into my home 4 years sooner.

        This is not to mention the added tax benefits which add to the mortgage numbers. You are not correct in saying you are ‘down’ by paying interest and then only recovering a part of it on your taxes. You have forgotten to consider the rent which is paid without any recovery.

        Again, you DO put yourself at risk with a mortgage – it is a leveraged investment. If you get hurt, sick, lose a job, whatever… you have exposure. But I do not agree that paying cashing is always better financially than loan vehicles. Straight numbers – looking at total costs, networth, etc. — show that saving 20% and using a mortgage will likely result in the best case. But is it worth the risk? That is a different question.

  22. L.D. Sewell says:

    To each their own. Some like to do the math and decide that they would rather have a mortgage and invest any lump sum cash they may have elsewhere.

    The problem is that real life is not theory and it doesn’t always go according to plan. Life happens. People lose jobs. Companies go under. Relationships end. Medical problems and injuries happen. The economy has its hiccups now and then too.

    When it happens to you – and make no mistake, no one is immune – it can have a catastrophic impact on your life. When you are in debt up to your eyeballs and living in a heavily mortgaged house with a huge monthly payment you end up with little to no income to make those payments.

    The stress meter will go beyond redline. Whatever savings is in the bank will be burned through quickly when it is being used to cover all or most monthly expenses.

    It happens. It has already happened to millions and it will continue to happen to millions more who will learn lessons the hard way.

    Instead imagine this – picture yourself living in a paid for home you do own with no mortgage or loans against it at all. No car payments. No credit card debts. No debt period.

    If you have that and an adequate amount of cash saved, then what happens if something bad happens? It’s not as big of a deal then, and it’s a whole lot less stressful.

    For those who do want to invest, they can invest as much of their income as they like without risking losing everything.

    I’m just saying… There is more than one way to live and debt is optional not mandatory. To me ALL debt is bad debt and should be eliminated.

  23. Zeph says:

    It sounds like a smart idea – minimizing expenses and making consistent savings. I do admire the discipline the couple has. But, instead of just making savings to put away for a home, how about putting that money into profitable investments with managed risk? That will not only enable the couple to afford their dream home, but will also create an opportunity for passive income in the future.

  24. Alan Loughlin says:

    Houses and apartments tend to be expensive and if you don’t have the means to pay for it outright, you’re probably going to have to opt for a home loan. But here’s the thing with home loans; lending institutions usually loan you around 80-90% of the cost of the property, depending on the lender. The remaining 10-20% must be put up by you, the buyer. So, make sure that you have enough cash to make the down payment.

  25. Kari says:

    Where do you find a house for $150k? There’s nothing within hours of where I live. Our first house was over 20 years ago and about $240k. It was a semi-detached on a 16’ wide lot with no garage. Around here now a parking spot goes for over $50k.

    • Deacon says:

      It definitely depends where you live! If you live somewhere with a more expensive housing market, you may have to rethink your strategy and spend time saving more. But it’s still possible to avoid that mortgage!

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