If you’ve got a small deposit, you may now be able to apply for a 95% mortgage. From 19th April 2021, you can purchase properties up to £600,000 with just a 5% deposit.
When buying a house, there are two different ways you can go about paying for it. You can either take out a mortgage where you pay a deposit and the bank lends you the rest of the money, or you can buy the house outright with cash, and therefore won’t need a loan.
You absolutely can buy a house with cash, providing you have the funds upfront to hand over to the seller. But like anything, it comes with its own advantages and disadvantages. We’re going to run through the pros and cons of buying a house with cash, so let’s start off with the pros.
If you already have the money to buy the house upfront, it means there’s less room for things to go wrong. For instance, you won’t have to pass any affordability checks from the lender, you won’t be caught up in a chain, have to wait for valuations to be carried out, or for funds to be released etc. All of these things make you a more attractive buyer.
As there is less room for things to go wrong, the sale is pretty much guaranteed to go ahead. If you’re the seller, this means you don’t have to worry about things such as your buyer getting their mortgage approved.
Getting a mortgage can take time. You have to wait to go through affordability checks, then your mortgage offer has to be approved before the funds are released. Cutting out this part of the process means that a cash buyer should be ready to move more quickly. The only thing you’ll have to wait for is the legal checks and any surveys (if you decide to have a survey).
As you’re paying for the house outright, you don’t have to worry about being able to afford your monthly mortgage repayments. Even if the worst were to happen and you became unemployed, you’d be able to rest assured knowing that you still have a roof over your head.
With any mortgage, the lender will charge you interest on the amount of money you’re borrowing. However, if you’re a cash buyer then you won’t have to pay any interest at all. You won’t have to pay any other charges either, such as early repayment charges (ERC).
Finding the money to buy a house outright is quite an achievement, however, you need to be careful that in doing so, you aren’t tightening the purse strings too much. You need to make sure that after you’ve paid for the house, you still have enough money for the running costs e.g. utility and food bills.
Even though you won’t have to worry about paying the mortgage repayments, if you were unable to work due to illness, or got made redundant, you need to ask yourself the question, would I still be able to afford the running costs of the house? If the answer is, I’m not sure, then it’s worth getting in touch with us to discuss what protection policies are available, such as buildings and contents or income protection.
Often cash buyers know that they’re in a strong position, so they might be more likely to try their luck and make an offer below the asking price. Although this might not be what you had in mind, it’s worth asking yourself, what’s more important to you; a quick sale, no-chain buyer, or holding out longer for a bit more money?
Sometimes properties are listed asking for ‘cash buyers only’. This can raise a few eyebrows as it could indicate that there’s something wrong with the property which means it would be difficult, or impossible, to get a mortgage. For instance, there could be structural issues, such as subsidence or fire damage. That’s why, if you’re the buyer, it’s important to pay for a house survey so that any issues will be brought to your attention.
For more information on moving house or getting on the property ladder, please feel free to contact our friendly team and we can put you in touch with an adviser local to you.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.