Buying a house with cash: The pros, cons, and process
Thinking of raiding the piggy bank to buy your new home? Here's the lowdown on buying with cash.
Last updated on
Jul 28, 2022 18:44
Collecting enough cash together to buy a property is no mean feat. But if you do have that kind of money stashed away, is buying a house with cash the right decision?
In this article, we take a look at how being a cash buyer affects the home buying process in the UK and explore the pros and cons of using cash instead of getting a mortgage.
You’re a cash buyer if you’ve got all the money you need to buy a property ready to go when you make your offer. We don’t mean in a suitcase under your bed – in fact, paying for a house with physical cash usually isn’t allowed because of UK money laundering rules. Instead, you’ll be using the money sitting in your bank account.
If you’re aiming to sell your current home and use the proceeds to buy another property, you’re not technically a cash buyer. That’s because the money is still tied up in your home – it’s not available for you to use right now.
The process of buying a house with cash actually looks very similar to the process of buying a home with a mortgage. The main difference is that you don’t need to prepare and submit a mortgage application, and then wait for it to be approved. Otherwise, you’ll be following the same steps:
Technically, when you’re buying a house with cash, you don’t need to get your solicitor to carry out the usual searches on the property. But it’s still strongly recommended you do.
Searches are where your solicitor makes inquiries with local authorities to uncover potential issues with the property or the local area. For example: Is the property connected to the sewerage network? Is it located on a flood plain? Is the land it’s on contaminated?
If you’re relying on a mortgage lender to help you buy your home, there’s no getting out of these searches. The lender will want to be sure that their money isn’t at risk.
But, as a cash buyer, it’s still a good idea to get your solicitor to conduct searches. They cost a few hundred pounds (paid through your solicitor), but they’re worth it to make sure you’re going into the sale with all the information you need to know about the property.
A cash property sale can potentially complete in a matter of weeks. Skipping the mortgage application step may save you the four to six weeks it typically takes for an application to be approved.
That said, other factors can impact the buying process and draw it out. For example, searches can take longer than expected, or your seller may struggle to move out in time.
So, should you raid the piggy bank to buy your new home? Let’s look at the pros and cons of buying a house with cash:
If house prices are rising, the answer might be yes. But if the market is slower, your best bet might be to get a mortgage and invest some of your money another way.
The combined rental income (plus any increase in value of the properties) could exceed the returns you would have received on one property, even one bought with cash. Again, it’s important to get independent financial advice when you’re considering this kind of step.
If a seller has listed their property as “cash buyers only”, you should definitely ask the estate agent a few questions. The seller might be looking for a cash buyer because they know it would be tricky (or even impossible) to get a mortgage on the property. Maybe there are serious structural problems with the building, or perhaps the site is prone to flooding.
On the other hand, the seller might just be looking for the quick and easy sale that a cash buyer can often provide. They may want to move soon, or perhaps they urgently need the money they can raise by selling up.
Either way, if you’re considering buying a “cash buyers only” property, it’s more important than ever to get a structural survey carried out there. If you discover any issues, you might still decide to go ahead with the sale – but at least you’ll know what you’re getting into.
Yep, you can buy a house with cash and then remortgage it later. You might find that potential lenders want you to have lived in your home for at least six months before they’ll give you a mortgage, though.
When you apply, your lender may also ask questions about why you’re looking to remortgage when you currently own the property outright. And, as with any mortgage application, they’ll carry out affordability checks to make sure you’ll be able to keep up with your mortgage repayments in the future.
So, yes, if you decide to buy a house with cash, you can still change your mind and get a mortgage later on. You always have options. See our quick guide to getting an unencumbered mortgage for more detail.
Wondering if you can get a mortgage? Find out what most lenders want to see before applying for your first (or next) mortgage.
The stuff you need to ask the seller, the estate agents, and your solicitors when you’re buying a home.
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