Buying a home all in cash can have disadvantages. Eric Dorsch, a New York attorney with Kozusko Harris Duncan, said non-U.S. citizens who choose not to finance a new home may be subject to the government’s new reporting requirements for all-cash deals. He also noted that debt can be used, in certain circumstances, to minimize exposure to U.S. estate taxes, while paying with cash brings no similar benefit.
Edward Mermelstein, managing partner of the Manhattan law firm of Rheem, Bell & Mermelstein, did point out that New York City charges a mortgage recording tax of as much as 2%, which home buyers can avoid if paying with cash. However, he added, mortgage interest is typically deducted on first and second homes, and a cash purchase would negate that advantage.