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Buying a House With Cash

The majority of houses are bought with a combination of a deposit and mortgage, but not all of them. Some people secure their new homes as cash buyers. But what exactly does this mean, and is it better than buying somewhere with a mortgage? In this guide, we’re covering everything you need to know about buying a house with cash in the property market.

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What is a cash buyer?

A cash buyer means you purchase a property by paying for it outright. In other words, you don’t go to a bank or building society for a mortgage and instead fund the entire price of the home from your own pocket.

It also means you can’t rely on selling your current property, as you need to prove that you have the full amount before the purchase takes place. In 2020, around a quarter of all house transactions were from people buying a house with cash from their bank.

Are there any differences in the sales process?

The buying process differs between cash buyers and somebody purchasing with a mortgage. Those going down the mortgage route will need to satisfy the lender’s requirements, and many checks and balances take place.

As a cash buyer, you don’t need to go through such a strenuous process as the money comes from your own pocket. However, a smart cash buyer should still do their due diligence – like a property search and survey – on the home and conduct many of the same checks that a lender would perform.

From the seller’s perspective, the sale process is essentially the same regardless of selling to a cash buyer or someone with a mortgage. It might, however, be faster if you’re selling to a cash buyer.

What is the cash-buying process?

Buying with cash tends to be faster than getting a mortgage as you don’t need to wait for the lender to decide whether or not to offer the loan. Even so, the fundamentals are the same:

Make an offer for a property
Instruct a solicitor
Instruct a surveyor
Wait for solicitor search pack and queries to come back
Set a date for contract exchange
Completion and receive the keys to your new home

Again, hiring a solicitor to perform the necessary checks is essential for managing the sale. Otherwise, you could end up buying a property and face unforeseen problems and regret making the purchase.

What are the benefits of buying a house with cash?

Sale unlikely to fall through

Buyers being refused a mortgage is one of the key reasons house sales fall through. However, when buying with cash, the chances of the sale collapsing reduce as you already have the means to pay for the property.

More appealing to sellers

Sellers generally prefer to deal with cash buyers, as it eliminates many of the complexities around selling a home. We’ve already touched on the mortgage aspect, but a cash buyer also won’t be involved with a property chain. This means the sale won’t fall through because someone pulls out of the chain, thus collapsing everything in the process.

More choice

As a cash buyer, you will have more access to the property market, as not all homes are mortgageable. These include fixer-uppers, some new builds – especially off-plan ones – and buying through a property auction. As a cash buyer, there are no restrictions on the type of property you buy.

Potential to save you money

If a seller knows you’re a cash buyer, they might be more inclined to accept a slightly lower offer for the reasons stated above. Cash-only sales are more likely to go through, which appeals to sellers.

More financial freedom

As a cash buyer, you’re the outright owner of the property and have all the equity. Should you face financial difficulties in the future, you can sell the property without paying back the lender. Likewise, if the property’s value increases, you will reap the benefits of the full amount. Of course, you should also consider the likelihood of the property’s value decreasing, meaning you lose out on some of the investment.

No interest

Mortgages come with interest, which needs to be paid off in addition to the loan amount. But because you don’t have a mortgage as a cash buyer, there’s no need to pay any interest.

Do you need to show proof of funds?

When you make an offer, you’ll need to prove that you have the means to pay for the property outright. This involves showing the estate agent proof of funds and that you can complete the purchase without any extra financial assistance.

Be prepared to face questions like ‘where does the money come from?’ It’s an estate agent’s legal responsibility to check for money laundering and ensure that no criminal activity led to the acquisition of the funds.