Buying a house with cash saves you years of mortgage interest and leaves you with no monthly repayments, but it also ties up a large chunk of your money in a single asset; your house. Whether it’s the right move depends on your wider finances. This guide weighs up the benefits, the risks and the alternatives.
Can you buy a house with cash?
Absolutely! Did you know? Around 1 in 4 UK home sales are currently cash purchases, according to Zoopla. So, buying a home outright is more common than you might think.
If you have the funds readily available, you can buy a house without taking out a mortgage.
That said, if you’re relying on the sale of your existing property to fund the purchase, you can’t be considered a cash buyer until those funds are available.
The good news? This shouldn’t make much difference to your overall plans. You’ll still be buying without a mortgage once the money is in place, but the seller or estate agent might want to know where the money is coming from and when it will be available.
Advantages of buying with cash
There's something pretty appealing about buying a house outright.
No mortgage or monthly repayments and, once the purchase is complete, the freedom to make your home your own without a lender having a say.
Of course, there are plenty of practical benefits too. Here are some of the biggest advantages of buying with cash:
Stronger negotiating position
Being a cash buyer can give you a real advantage when it comes to negotiating.
Sellers tend to prefer cash buyers because there’s no mortgage application or lender approval to worry about. This can make the sale feel quicker and more certain. That extra confidence could even help you negotiate a better price.
Faster closing
Buying without a mortgage means fewer steps to complete before the sale goes through. With no mortgage application to worry about, you can focus on the legal checks and paperwork needed to finalise the purchase.
This can make for smoother, quicker purchase, especially if the seller is keen to move quickly.
No monthly mortgage payments
One of the biggest perks is, of course, saying goodbye to mortgage repayments.
With no monthly payment to budget for, you have more disposable income each month, giving you more financial flexibility over how you spend, save or invest your money.
Debt-free ownership
Once the purchase goes through, the property is yours and yours alone.
No mortgage debt, no interest to pay and no mortgage repayments to make. For many homeowners, that can bring a real sense of financial security and peace of mind.
Disadvantages of buying a house with cash
While skipping the mortgage might sound like a no-brainer, buying a house with cash isn’t without its downsides.
Putting a large chunk of your money into one property can reduce your ability to buy other things and you could miss out on other investments along the way.
It’s worth looking at the bigger picture and thinking about whether paying in cash fits with your wider financial plans. If you’re unsure, speaking to a financial adviser could help you weigh up the pros and cons.
Some disadvantages of buying with cash include:
Tying up your assets
Buying a house with cash means putting a significant amount of your money into one asset.
Once it’s tied up in your home, you’ll have less readily available cash to put towards other things. These might include investments, unexpected costs or opportunities that come your way.
Overstretching yourself
‘Your scientists were so preoccupied with whether or not they could, they didn't stop to think if they should,’ or so said Dr Ian Malcolm in Jurassic Park. And whilst buying a house isn’t necessarily comparable with genetically modified dinosaurs, there is a lesson to be learnt here.
Even if you have the cash to buy a house outright, it doesn’t necessarily mean you should pour your savings into it.
That’s because you’re exposing yourself to future risk, should you find yourself suddenly unable to work - for example, if you were unable to work due to illness, or were made redundant.
If you’re not sure how you’d manage financially, it could be worth looking into what protection policies are available, such as critical illness cover or income protection.
Potential property faults
You might occasionally come across properties advertised as ‘cash buyer only’. This can be a bit of a red flag, as it might indicate that there’s an issue with the property that could make it difficult to get a mortgage.
For example, the property could have structural problems, such as subsidence, or need a significant amount of work following fire damage.
As a cash buyer, you won’t have a mortgage lender carrying out its own checks on the property, so it’s important to do your homework. A professional house survey can help uncover potential problems before you commit to buy, giving you a clearer picture of what you’re taking on.
Understanding the cash buyer market
If you’re thinking about buying a house with cash, there are a few things worth knowing about how the process works.
From proving you have the funds to understanding how cash could affect your purchase, here’s what to keep in mind.
Preparing finances for a cash purchase: Before you start house hunting, make sure your funds are readily available and you’ve budgeted for the other costs that come with buying a property.
Finding the right property: Once your finances are in order, it’s time to decide on where to live and find a property that fits with your budget and lifestyle. Don’t forget to factor in any work or improvements it might need.
Making a cash offer: Found somewhere you like? You can make an offer and let the seller or estate agent know that you’re a cash buyer, which could make your offer more appealing.
Showing proof of funds: The seller or estate agent will usually want to see evidence that you have enough money to buy the property. This could be bank statements or other documents showing you have the funds in place, known as proof of funds.
Getting the right professionals on board: You’ll still need professionals like solicitors and conveyancers to help with the legal side of the purchase to make sure everything is above board.
Finalising the transaction: Once the searches, surveys and legal checks are complete, you can exchange contracts and complete the purchase. Time to get the keys and move in!
Is buying a home in cash worth it?
There’s no simple answer here. The better question might be, what would buying with cash mean for you financially?
Would paying for your home outright still leave you with a comfortable emergency fund and enough money for your other plans? Or would it leave you with very little cash left over and increased financial worry?
It comes down to finding the balance that works for you. If you’re unsure, speak to an adviser to go through the pros and cons of buying with cash to understand your options before making a big decision.
For more information on moving house or getting on the property ladder, get in touch with our team.
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Something to bear in mind...
FAQs
Not always, no! Being able to buy with cash can make your offer more attractive to a seller, but it doesn’t necessarily mean they’ll accept a lower price.
If you’re buying with cash, the seller or estate agent will want to see proof that you have the available funds to complete the purchase. It could be a recent bank statement showing you have enough money to cover the purchase. This is known as proof of funds.
It can, but it’s not a guarantee. Without the usual mortgage application process, there’s one less potential hurdle to get through, which can help speed things up.
Yes. Even if you’re buying without a mortgage, you’ll still need a solicitor or conveyancer to handle the legal side of the purchase. They’ll carry out searches, check the property title and deal with the contracts and transfer of ownership.