I would much rather prefer the latter actually because the risk is lower. People tend to seriously discount the risk of non-liquidity in these situations, which

I would much rather prefer the latter actually because the risk is lower. People tend to seriously discount the risk of non-liquidity in these situations, which is the scenario the former sets up. I know multiple people that discovered this the hard way. Houses without mortgages aren't anywhere close to free to live in and they can have very little liquidity in a big downturn.