If You Buy a House With Cash, Does It Change Clark’s 10-Year Rule?

Craig Johnson | June 7th, 2021

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Welcome to Ask Clark, a column designed to answer your financial questions, by money expert Clark Howard.

If I Pay Cash for My New Home, Do I Still Need to Stay in It for 10 Years?

Kate from Texas asks: “If you buy a house with cash does it change Clark’s 10-year rule?”

Clark’s Take on Whether Buying a House With Cash Changes His Rule

Clark says: Yes! That’s because his 10-year rule is all about recouping the initial mortgage costs and benefitting from the appreciation of the property. The equation changes if you pay off the mortgage early, or since you’re paying with cash, never have a mortgage at all.

But most of us do need to take out a mortgage. And the rationale behind Clark’s 10-year rule is based on how home prices have continued to climb over the past decade. “What happens is that when something goes up far more than normal … there is a period of correction that comes at some point,” he says. “And so you reduce the risk of owning a home when you own it in a longer cycle.”

But Clark says paying for a home in cash would alter the formula.

“The 10-year-rule is based on the expenses involved in buying a home and selling a home. If you finance a house out of your own pocket — in other words, there’s no loan — you reduce a lot of the expenses involved.”

But there are still some expenses, so Clark recommends that, even if you pay cash, you hold on to the house for an “eight-year or traditional seven-year ownership cycle, instead of the 10.”

Want more tips? Use these steps to pay off your mortgage early.

To hear Clark’s full take on this question, listen to the segment:

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