When people try to look for a new home after selling their previous house, they are faced with the question whether they will buy a new house cash or get mortgage for it. A person’s usual advice regarding this question is that "a person should always mortgage a home and put proceeds of home sale into other investment which are more liquid."

This advice is well founded as the federal tax benefit of mortgaging the home compared to paying cash can be about the same.

But due to other considerations to this decision that I hope you'll take into account other not so obvious things besides tax consequences and liquidity. A home is a different kind of investment, but it is unlike any other.

The buyer/owner dwells in it and there is a certain feeling of attachment to it. Some may fell in love with the home. So the most important question you must ask yourself is: What sort of risk, both financial and psychological, are you most willing to accept to acquire it?

Both scenarios have its advantages and disadvantages.

On the positive side, buying a house with cash brings a sense of security that no mortgage can match. You also won't have to pay interest on the loan, closing costs, points or fees. You won't have to worry whether your stocks and bonds are performing well enough to cover your monthly mortgage payment, as well as your other household expenses like food, property taxes and health care, which will undoubtedly cost more in the coming years than they do now. And you'll have plenty of equity to tap with a reverse equity mortgage, should you ever find your income insufficient to pay your bills.

On the downside, your money will be tied up in an asset that might be very hard to sell in a down market like the one we're in now. This typically doesn't matter as much to retirees planning to stay in one place indefinitely as it does to employees who relocate every few years for their jobs. But it could become a factor should you decide to sell because of sudden illness, divorce or other reversal. You'll also have less cash on hand to invest in other ways, or to spend for pleasures like a trip abroad, a boat or flying lessons.

It is very important to think about your lifestyle which will dictate your cost of living and know your investment skills before you make the decision. If you need help, talk to a financial expert who specializes in retirement planning. Just remember there are factors to consider and what can spell success for someone may not always be the same with the other.