You'll sleep more soundly.  

That said, if you start talking to lenders and hear things like 5-year balloon, full-recourse, etc. and that translates (for you) into "it's hard to sleep at night with those terms" then stick to cash.  

Put the 40% down and sleep well.

Turns out the house is located close to a highway and their baby can't sleep at night?

perhaps you could live there while it is being built even if you happen to sleep eat and poop next door.... that could save timeI think the most important factor is where do you want to live because if you want to live in that area than it may be worth it unless you can rent a smaller more affordable place for less money and the main factor is you financing because if you somehow got a builders loan and have to refi or sell to make the ballon payment in a few years that where you may have the problems regarding interest rates... but least you have your current house already paid off than just re fi traditionally with a fixed rate and you'll be fine so when you sell that one for a profit your new free house really will be free and paid off even if the rates go up....its getting to that point in our economy where people need to look closely at adjustable rates or short term ballon payment loans that will require a refinancing in a year or two when the rates will likely be higher....

Flea market flipping - my long time girlfriend has a fine arts degree - so she can refinish furniture in her sleep.

After being left an irate message the previous day with the words "illegal" and "can't sleep" mixed in they figured it out. 

Just ONE street over (the end of the block) starts a whole new area where crime is still an issue, police walk the streets 24/7, the homeless are seen sleeping at every corner, etc.

I have 7 years insurance expirience, I could write home/auto insurance in my sleep...

That'll help you sleep at night.