Buying a House in Cash
10 May 2022
There are many benefits that come with buying a home in cash, but also some major considerations as well.
In this article, we’ll explain:
- What it means to be a cash buyer
- How the buying process works when you buy in cash
- What to expect when buying a property with cash
What is a cash buyer?
A cash buyer is someone who buys a home without the need for a mortgage or selling another property to fund the purchase.
It’s a common misconception that a cash buyer is only someone who doesn’t require a mortgage, but this isn’t the case.
If you need to sell a property to fund your new purchase, even if you don’t require a mortgage, you will not be considered a ‘cash buyer’.
Can you buy a house with cash?
Of course, it is possible to buy a house with cash, this means you won’t require a mortgage to fund it the purchase.
Being a cash buyer can be beneficial for you and your seller, but there are things to consider before deciding whether to cash buy or obtain a mortgage.
Is it better to cash buy when buying a home?
There are several pros and cons that come with being a cash buyer, here are some we think are important to take into consideration.
Pro #1: You will be viewed as a more reliable buyer
When buying a property in cash you don’t require a mortgage and you aren’t relying on the sale of an existing property to fund your new purchase. Therefore, there is far less that can go wrong and the potential for a collapsed chain is reduced greatly.
This is hugely attractive for the seller of the property and puts you in a strong position when negotiating the purchase price.
Pro #2: Less stress
Moving home at any time is never straightforward, however, there’s much less complexity if you’re a cash buyer which results in less stress for both yourself and the seller.
Pro #3: Quicker purchase process
Getting a mortgage approved takes time, however when you buy in cash you’re cutting this part out of the purchase out. This means buying your house takes less time and is a smoother transaction.
Con #1: Your liquid cash is tied up in your property
When buying in cash, you’re committing a huge amount of your money into one asset. This means, if you require a lump sum of money in the future, selling your home or remortgaging may be the only option and these things can take time.
Con #2: Limited leverage
When you buy a house with a mortgage, you can leverage your loan to get a better return on investment in a rising property market. Leverage also works the other way too though, which means you have the potential to lose more when buying with a mortgage compared with cash if the market does fall.
Con #3: Other investment options are limited
If you choose to tie up all your cash in buying a property, it’s more than likely you will have little left to make other investments and diversify where your money is invested, potentially reducing risk.
How to buy a home with cash
The process of buying a house with cash is very similar to buying with a mortgage.
However, as you aren’t using a mortgage loan, you will be removing a major part of the home buying process – which makes the process much simpler and potentially faster.
The process to expect when buying with cash is:
- Find a property and make your offer
- Offer accepted
- Instruct a solicitor
- Instruct a solicitor for survey/valuation
- Solicitor searches, queries, and checks
- Completion and final monies
What documents you need for buying a house with cash
The seller’s estate agent will ask to see proof of your funds to buy the property, this can be shown in a bank statement.
They may also ask to see the source of your funds under money laundering rules, so you may need to show the following:
- Savings account statements
- Confirmation of gifted money
- Evidence from estate executers of inheritance money
Do you need a solicitor when buying in cash?
Even when buying a property with cash, you’ll still need a solicitor or conveyancer to do the legal work for you.
When buying with cash, your solicitor will not be required to liaise with your mortgage lender as no loan is required, however, they still must:
- Liaise with your seller’s solicitor
- Deal with forms and documentation such as property information forms, fittings, fixtures, and content forms.
- Deal with leasehold information forms if you’re buying a leasehold property
- Raise buyer enquiries with the seller’s solicitor
- Transfer all the cash related to the purchase on completion
When buying with a mortgage, local authority searches are mandatory, however, you can choose whether or not to have your solicitor complete them if you’re buying in cash.
Is buying with cash quicker?
When buying a house with cash you don’t need a mortgage, therefore there is no mortgage application process to go through and no legal work for you solicitor to complete when it comes to a loan.
This means buying with cash is generally much faster than buying with a mortgage.
Can you get a mortgage later after buying with cash?
If you want to take out a mortgage on the property you’ve bought later, you can.
This would be classed as a remortgage and would be subject to affordability checks by your lender, as well as falling under the criteria for lending on a property you already own 100% of.
Top tips for buying a house in cash
1. Be aware of properties that are only marketed to cash buyers
Often properties are listed in this way because the seller wants a quick and uncomplicated sale. However, it could mean the property is unlikely to be mortgageable, perhaps due to a major defect or legal issue, so always speak to the seller’s agent in detail and find out the reasons why.
2. Always have searches
When buying with a mortgage, your lender will insist your solicitor carries out a host of local authority searches. These searches flag up any potential issues with planning applications nearby, as well as flood or drainage problems that could mean they refuse to lend on the property.
If you’re buying in cash, having these searches carried out isn’t mandatory, however, doing so means you’ll get crucial peace of mind that your investment is sound.