5 min read
Discover the process, benefits, and potential risks of buying a property with cash.
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Buying a house with cash can streamline the home-buying process and potentially save you money in the long run. From faster transactions to avoiding mortgage interest rates, cash purchases can have many advantages. However, tying up large sums in property isn’t right for everyone. Here’s everything you need to know about buying a house with cash.
In this article we explain:
Being a cash buyer means you can purchase a property outright using readily available funds without the need for financing or a mortgage. This means you have sufficient money in your bank account to cover the full purchase price. Being a cash buyer doesn't involve paying with physical cash; instead, the money is transferred electronically. This ensures that all transactions are traceable and comply with legal requirements, including anti-money laundering regulations.
Buying a house with cash is essentially the same as buying with a mortgage. However, without a lender involved, the amount of paperwork and the number of steps required to close the sale are reduced. This can lead to a smoother and faster closing experience. The process of buying a house with cash looks like this:
Finding the right property. This step is similar to purchasing with a mortgage but as a cash buyer, you might find sellers are more eager to work with you since you can often move faster and there's less chance of the deal falling through.
Make an offer and have it accepted. Submit your offer to the seller or estate agent, emphasising you’re buying with cash as this can make your offer more advantageous. Sellers appreciate the simplicity and speed, and you might even have a bit more room to negotiate on the price or other terms.
Instruct a conveyancer to take care of your legal work. Unlike buyers using a mortgage, your conveyancer won't have to coordinate with a bank or meet their requirements, simplifying the legal process. You can also decide which conveyancing searches to conduct since you're not bound by a lender's stipulations. It's still recommended to carry out some searches, like checking for any local planning issues or environmental concerns, which could impact your decision to buy the property.
Arrange a property survey. Without a lender dictating what's needed, you get to choose if you want a property survey and pick the type that makes sense for you. It's always good to know the condition of the property, but you have the flexibility to opt for a full structural survey, a basic report, or even skip it altogether if you feel confident about the property's condition. Get a quote for your survey.
Exchange contracts and pay your deposit. This step makes your purchase legally binding. Since there are no mortgage conditions to satisfy, you can often reach this stage faster. You and the seller can agree on dates that suit you both without waiting on a bank's timeline.
Completion – this is when you send over the remaining amount for the property and pay the remaining legal fees. Again, since you're not waiting for mortgage funds to be released by a lender, this stage is often faster and more straightforward. Ownership of the property transfers to you once the funds are received. That is when you officially own the house.
The estate agent requires proof of funds to confirm that you have enough money to purchase the property with a cash offer. This is necessary to ensure that you can afford the property.
They will also inquire about the source of the money. They have a legal obligation to verify your funds and ensure they are not the proceeds of crime. This is in accordance with anti-money laundering laws.
Be prepared to provide documentation such as your bank statements, savings account statements, investment portfolio statements, a letter from your bank and any proof of asset sale. Having this documentation handy can speed up the process and give the seller peace of mind that you can follow through with the purchase.
Once you’ve organised your documents, be ready to explain any significant recent deposits in your accounts, showing supporting documentation.
There are lots of benefits of being a cash buyer that make you more desirable to sellers. These include:
You’re a more attractive buyer: As a cash buyer, you present as a lower risk to the seller, as you don't need to worry about getting approved for a mortgage. You may also be chain-free and not waiting for the sale of another property to fund your cash purchase. These things can contribute to being able to negotiate better terms for the property you wish to buy.
The conveyancing process is a lot quicker: If you don't need a mortgage, the conveyancing process can be faster. This will reduce the time it takes for the sale to finish. This makes you an even more enticing buyer to someone who wants a quick sale.
You’ll avoid paying interest rates: As you won’t have a mortgage as a cash buyer, you won’t be paying interest to a lender. However, if you do use savings to pay for your property, you will no longer be earning interest on them.
More security: Buying a house with cash means that you will own it outright and you won’t need to worry about monthly mortgage repayments. So, even if your circumstances change (such as losing your job or no longer being able to work), you have the security of owning your own home.
Stronger negotiating power: Cash buyers often have more leverage in negotiations. Sellers may be willing to accept a lower offer from a cash buyer because it typically means a quicker, more certain sale with fewer complications.
Here are the advantages for sellers when dealing with cash buyers:
With no mortgage approval needed, sellers avoid the risk of the sale falling through due to failed mortgage applications or lending criteria issues. This eliminates concerns about property valuations coming in too low or buyers being rejected by lenders, making the entire process more secure.
A cash sale can complete in as little as 7-10 days, which could be very attractive for sellers needing a quick move. Without mortgage-related delays, the timeline is more predictable, and sellers can plan their next move. This allows them to confidently proceed with their own property purchases or relocation plans.
Cash buyers can purchase properties that might be challenging to mortgage, such as those with structural issues or construction abnormalities. This opens up the market for sellers with properties that might otherwise be difficult to sell through traditional mortgage-dependent buyers.
For landlords selling tenanted properties, cash buyers are particularly valuable as they're often willing to purchase with sitting tenants. This allows for a smooth transition without the need to end tenancies or wait for properties to become vacant.
Cash buyers typically come without the complications of a property chain, significantly reducing the risk of the sale falling through due to issues with other transactions. While the seller may still have their own onward chain, having a chain-free buyer removes a major source of potential delays and complications.
While being a cash buyer does have many advantages, there are some risks that you should be aware of:
It is often presumed that cash buyers may get a lower offer accepted on a property than people who are buying with a mortgage. However, this is not always the case. Some sellers prioritise price and are willing to choose a longer chain to get a higher price for their property.
When you buy with cash, you don't have to worry about monthly mortgage payments, but it can reduce your liquidity, leaving you with less cash on hand for emergencies or investments. It’s important to note that there are still other monthly expenses to consider, like energy bills, council tax, and food. You should assess whether you’ll have sufficient funds to cover these after your purchase.
Investing in property can be a good choice for your savings. However, it makes your savings less accessible, and the value of the property can change. We recommend speaking to a financial adviser to make sure it is the best move for you.
When you're buying with cash, there's a risk of overpaying for the property. Mortgage lenders require a professional valuation to ensure the property's worth matches the loan amount. As a cash buyer, you won't have this requirement, so it's crucial to commission your own independent valuation to avoid paying more than the property's market value.
Without a lender's mandates, you might be tempted to skip important surveys or legal checks to save time or money. However, this could lead to costly surprises down the line, such as structural issues or legal disputes. Always ensure you conduct thorough due diligence, including property surveys and conveyancing searches.
When purchasing a house, whether with cash or a mortgage, you must consider conveyancing fees. These fees cover the cost of hiring a professional to handle the necessary legal work. However, there are some fees that you might save on.
You don't have to pay certain fees, including those for admin and valuations, for the mortgage part of the conveyancing process. You might save money on conveyancing searches if you don't use a mortgage lender. However, it can still be a good idea to get them for your own peace of mind.
Get a free online conveyancing quote today
Yes, you can buy a property with cash and then remortgage it later. Some lenders require you to live in your home for six months before they approve your mortgage application.
Mortgage lenders may also ask you why you are looking to remortgage when you own your property outright. They will check if you can afford to pay your mortgage in the future when you apply for it.
‘Cash buyers only’ is a term used to show that the seller is seeking a buyer who can complete the purchase without relying on financing. This is often taken due to specific reasons related to the property or the seller's circumstances; for example, often these properties are unsuitable for mortgage lending, or the seller requires a quick, certain sale. If you’re considering such a property, make sure you:
Understand the reasons why the property is cash-only, so you can assess the risks.
Conduct thorough checks: Engage professionals for surveys and legal advice.
Assess financial implications: Understand that this is a big commitment and familiarise yourself with any potential costs involved.
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