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Buying a house with cash: Do’s and Don’ts

There are lots of benefits to buying a house with cash, but also some major considerations, too.

In this guide, we’ll explain:

  • What a cash buyer is.
  • The pros and cons of buying with cash.
  • How the buying process works if you’re a cash buyer.
  • What you can expect when buying a property with cash.

Our expert, Eric Walker, will also provide lots of tips along the way if you’re thinking of buying a property with cash.

What is a cash buyer?

A cash buyer is someone who can buy 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 simply someone who doesn’t require a mortgage, but this isn’t the case.

If you need to sell a property to fund another purchase, even if you don’t need a mortgage, you won’t be classed as a ‘cash buyer’.

Can you buy a house with cash?

It’s possible to buy a house with cash and this means you won’t require a mortgage to fund it.

Being a cash buyer can be beneficial to you and your seller, but there are also some things you’ll need to consider before deciding whether to buy with cash or obtain a mortgage.

Is it better to be a cash buyer when buying a house?

There are a number of pros and cons that come with being a cash buyer:

+Pro #1: You’ll be seen as a more reliable buyer

“If you’re buying with cash, you won’t require a mortgage and you won’t be relying on the sale of existing property to fund your new purchase,” says Martin & Co’s Managing Director Eric Walker.

“That means there’s far less than can go wrong and the potential for a collapsed chain is greatly reduced."

“In the eyes of a seller, this is hugely attractive and puts you in a strong position when negotiating over a purchase price.”

+Pro #2: Much less stress

“Moving home is never 100% straightforward,” says Eric.

“But there’s much less complexity if you’re a cash buyer and this means less stress for both yourself and your seller.”

+Pro #3: A quicker purchase process

“Getting a mortgage approved takes time,” says Eric. “and because you’re cutting out this part of the buying process when you purchase with cash, buying your dream home should be much faster.”

-Con #1: Your liquid cash is tied up in your property

“By purchasing with cash, you’re committing a huge amount of your money into one asset,” says Eric.

“This means if you need to access a lump sum quickly in the future, selling your home or remortgaging may be only option – and these things can take time.”

-Con #2: Limited leverage

“When you buy with a mortgage, you can leverage that loan so you get a better return on investment in a rising property market,” says Eric.

“Leverage works the other way, too, however, meaning you have the potential to lose more when buying with a mortgage compared with cash if the market falls.”

-Con #3: Your other investment options are limited

“If you tie up all of your cash in buying a property, it’s likely you’ll have little left to make other potential investments and diversify where your money is invested, potentially reducing risk,” says Eric.

How to buy a house with cash

The process of buying a house with cash is largely the same as buying with a mortgage.

However, because you won’t require a mortgage loan, you’ll be removing a major part of the home-buying process – which should make it much simpler and potentially much faster.

The process you can expect when buying with cash is:

  • Find a property and make an offer
  • Offer accepted
  • Instruct a solicitor
  • Instruct a surveyor for survey / valuation
  • Solicitor searches, queries, and checks
  • Exchange contracts and pay deposit
  • Completion and final monies

The documents needed to buy a house with cash

The seller’s estate agent will usually ask to see proof of your funds to buy the property through bank statements.

They may also ask to see the source of your funds under money laundering rules, so you may also need to show:

  • Savings account statements.
  • Confirmation of gifted money.
  • Evidence from estate executers of inheritance money.

As well as proving you have the cash to buy the property, you’ll also need to supply:

  • Proof of ID (driving licence or passport).
  • Proof of address (utility or council tax bill).

Do I need a solicitor when buying with cash?

Even if you’re 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 won’t have to liaise with your mortgage lender as no loan is required, but they will still have to:

  • Liaise with your seller’s solicitor.
  • Deal with forms and documentation like property information forms, fittings, fixtures, and contents forms and 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.

Local authority searches are mandatory when buying with a mortgage, but you can choose whether or not to have your solicitor complete them if you’re buying with cash.

Is it quicker buying a house with cash?

Because you don’t need a mortgage when buying a house with cash, there’s no mortgage application process to go through and no legal work for your solicitor to complete when it comes to a loan.

This means buying with cash can be much faster than buying with a mortgage.

Can I get a mortgage later when buying with cash?

If you wish to take out a mortgage on a property you initially buy with cash at a later date, you can.

This would be classed as a remortgage and would be subject to affordability checks by your lender, as well as falling under their criteria for lending on a property you already own 100% of.

The cost of buying a house with cash

While many of the costs associated with buying a property are still payable even if you’re buying with cash, there are some you’ll avoid, too.

When buying with cash, you won’t have to pay:

  • Mortgage costs like the valuation fee and arrangement fee.
  • Mortgage interest.

However, even if you’re a cash buyer, you’ll may still have to pay:

  • Stamp duty, Land Transaction Tax (Wales) or Land & Buildings Transaction Tax (Scotland).
  • Survey fees.
  • Conveyancing and search fees.
  • Money transfer fees.
  • Land Registry fees.
  • Removals costs.

Do I pay more tax if buying with cash?

You don’t pay more in tax when buying a house with cash.

The only tax you may have to pay during the purchase process is Stamp Duty (Land Transaction Tax in Wales or Land & Buildings Transaction Tax in Scotland).

Stamp duty is payable regardless of whether you buy with cash or through a mortgage.

Top tips for buying a house with cash

1. Be aware of properties marketed only to cash buyers

“If you’re considering buying a property marketed as ‘cash buyers only’, make sure you complete thorough due diligence,” advises Eric.

“Often properties are listed in this way simply because the seller wants a quick and uncomplicated sale.

“But it could mean that the property is unlikely to be mortgageable, perhaps because of a major defect, or legal issue, so always speak in detail with the seller’s estate agent and find out the reasons why.”

2. Always have searches

“When you buy with a mortgage, your lender will insist your solicitor carries out a host of local authority searches,” says Eric.

“These searches show up any potential issues with planning applications nearby, as well as drainage and flood problems that could mean they refuse to lend on the property.

“As a cash buyer, having these searches carried out isn’t mandatory, but doing so means you’ll get crucial peace of mind that your investment is sound – and if it isn’t, you’ll still be able to walk away from the purchase.”

Is buying a house with cash a good idea?

“If you are able to finance a property with cash, it eliminates the need to pay interest on a loan or mortgage,” says Eric.

“Not only that, but the ability to pay for a house with cash makes you a very attractive option for potential sellers.

“Buying with cash certainly has its benefits, but you should always discuss your options with a Martin & Co agent before making your decision.”

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