If you had the cash to buy a home outright, the decision would seem obvious at first glance. No monthly payments, no interest charges, and no lender hovering over your finances for three decades. That kind of freedom is what draws a record share of buyers to skip the mortgage altogether and pay in full.
All-cash home purchases have climbed to an all-time high of 26% of all buyers, with 30% of repeat buyers bypassing financing entirely, the National Association of Realtors reported in its 2025 Profile of Home Buyers and Sellers.
Fidelity Investments has laid out a detailed breakdown of what happens to your broader financial picture when you lock hundreds of thousands of dollars into a single illiquid asset.
Fidelity calculates how skipping a mortgage costs buyers over $1 million
The core finding from Fidelity’s analysis centers on a scenario that many prospective cash buyers will recognize from their own search. A buyer purchasing a $1 million home with 20% down who opts for a 30-year fixed mortgage at a 7% rate would pay more than $1 million in total interest charges over the life of that loan, Fidelity reported.
“There have been many competitive bids on homes that high-net-worth individuals want, so you may get pushed to the front of the line if you come in with an all-cash offer,” said Michelle Caffrey, Advanced planner with Fidelity.
Caffrey noted that volatile markets can make for an inopportune time to sell, and that if investments are likely to outpace the mortgage rate, keeping money in the market may yield a better outcome.
That trade-off is particularly sharp in volatile markets, where liquidating investments to fund a home purchase could mean selling at a loss or locking in gains that would have continued to compound over decades.
Cash buyers dominate a housing market split by wealth and access
The surge in all-cash purchases reflects a housing market that has become deeply divided along lines of wealth and generational advantage. Jessica Lautz, NAR deputy chief economist and vice president of research, described the trend as creating a two-tier system in the market.
“We’re seeing buyers with significant housing equity making larger down payments and all-cash offers, while first-time buyers continue to struggle to enter the market,” Lautz said in the NAR announcement. The typical seller had owned their home for a record 11 years before listing, building substantial equity that powered their next purchase without needing a lender’s involvement.
Mortgage interest rates averaged 6.69% during the NAR survey period from July 2024 to June 2025, and the 30-year fixed rate moved between approximately 6.15% and 7.04% throughout 2025, Freddie Mac Primary Mortgage Market Survey data showed.
Those elevated borrowing costs have made the cash option look increasingly attractive to buyers who can afford it, even as financial planners caution against draining liquid assets for a single purchase.
Mortgage interest deduction savings add another layer to Fidelity’s calculation
One of the most overlooked costs of paying cash is the loss of a potentially valuable tax deduction that mortgage holders can claim. Homeowners who itemize their federal tax returns can deduct interest paid on up to $750,000 in mortgage debt, a benefit that reduces taxable income and effectively lowers the net cost of borrowing, according to the IRS, outlined in Publication 936.
Caffrey acknowledged this benefit in Fidelity’s analysis but offered an important qualification that many buyers miss when evaluating the deduction’s value. The mortgage interest deduction reduces borrowing costs rather than eliminating them entirely, meaning you are still paying interest even after the tax savings, Caffrey explained in the report.
Related: Redfin issues blunt warning about mortgage rates and housing market
The deduction’s usefulness also depends on whether your total itemized deductions exceed the standard deduction, which for the 2025 tax year stands at $15,750 for single filers and $31,500 for married couples filing jointly.
For 2026, those amounts rise to $16,100 and $32,200, respectively, the IRS confirmed. Only about 9.4% of taxpayers itemized in 2023, the latest year for which IRS data is available, according to the Congressional Research Service.
Paying all cash for a home can leave buyers financially exposed, Fidelity warns
Fidelity’s analysis raised a concern that resonates with financial planners across the industry: liquidity risk. A home is an illiquid asset, meaning you cannot quickly convert it to cash without selling, refinancing, or borrowing against it.
Buyers who pour their available funds into a purchase may find themselves without the financial flexibility to handle unexpected expenses or seize new opportunities. Caffrey emphasized that taking out a mortgage preserves financial flexibility by keeping cash available for short-term needs and other investments.
More Fidelity:
- Fidelity says $1 million won’t save your retirement
- Fidelity, Fed raise red flags on 401(k)s and IRAs
- Fidelity sends blunt message on S&P 500 after sudden rebound
A mortgage does not limit your options the way an all-cash purchase can, she explained in the analysis. But she also acknowledged the other side of the equation, noting that carrying a mortgage can restrict future borrowing capacity because lenders evaluate debt-to-income ratios when approving additional loans.
That concern is particularly relevant for buyers who may need home equity lines of credit for renovations or who anticipate large expenses such as college tuition or medical costs in the coming years. Property taxes, insurance, and routine maintenance alone can cost up to 3.2% of a home’s value annually, even without a mortgage payment, according to data from the National Association of Home Builders.
Fidelity’s framework for evaluating the mortgage-versus-cash decision
Caffrey recommended that buyers evaluate the decision by examining the full before-and-after picture of how an all-cash purchase would affect their complete financial situation, including future retirement needs, current cash flow, and the composition of their investment portfolio.
For buyers who have the resources to pay cash but want to preserve liquidity, Fidelity suggested exploring alternatives such as securities-backed lines of credit, which allow homeowners to borrow against their investment portfolios without triggering a sale.
