The Pros and Cons of Buying a House with Cash UK
Estimated reading time 7 minutes
Buying a house is a costly process. Not only does the property itself cost a significant sum, but the fees associated with it won’t come cheap either. There are some people though who have saved up enough money over time so they can purchase a house outright and actually skip many of the other costs associated with a property transaction.
Cash house buyers are increasing in number. Data from estate agents Hamptons showed that in January 2023, 39% of all agreed sales were to a mortgage-free buyer. In other words, they were purchased by somebody outright. This is a 10% increase from the previous year.
The reasons for this increase may vary across the broad spectrum of property buyers, but with the changes in interest rates making mortgages look less appealing, savings are being combined, and cash is being put into a property purchase rather than spread across more diverse investments.
In this blog we take a look at both the pros and cons of buying a house with cash.
What is a cash house buyer?
A cash house buyer is exactly what the term states. Somebody that buys a home for cash. Although not actual notes and coins. Handing over that kind of cash for a purchase would break the money laundering rules in the UK. Instead, the money is sitting in the bank account ready to be transferred to secure the purchase of a new home.
No mortgage, no loans, and no need to use the cash generated from the sale of the old home, a cash house buyer uses the money they already have to purchase a property, making a purchase instant rather than dragged out.
Gaffsy, for example, are cash house buyers, we have the funds ready to purchase a home without the need to take out a mortgage or loan resulting in those looking to sell achieving a fast house sale.
The advantages of buying a house with cash
With everything, there are both advantages and disadvantages. It’s whether the advantages outweigh the disadvantages that determine whether it is worthwhile. With cash house buying, the advantages tend to be quite considerable. We have spoken in the past about the number of house sales that fall through – recent data said as many as 1 in 3 – and with cash house buying, both the buyer and the seller feel more confident that they won’t see their property become part of that statistic.
Along with that, there are plenty of other reasons some look to buy houses with cash rather than take out any form of loan:
No need for a mortgage
House purchases often collapse due to mortgage issues. A lender can decide to pull out should there be issues with the property valuation, with the survey or a change in the applicant’s circumstances. This then leaves those buying having to start the process all over again.
A cash house buyer has the funds already in place meaning no need for the mortgage and therefore less risk of a purchase falling apart.
Purchasing a home with cash means it is yours right away. There is no chance of repossession, or falling into mortgage arrears as there are no payments to fall behind on.
Quick process for home buying
A cash purchase is perhaps one of the quickest ways to secure a property and this is appealing to those looking to buy or sell a house or flat fast. It can be even more appealing to landlords. Especially those selling a buy-to-let property or looking to sell a property portfolio to investors and seek a quick exit from the world of property.
Mortgage applications can take significant time, more than a month in some cases, and this works against the fast timeline appealing to both buyer and seller. With just a few weeks, and in some cases, just a few days needed to complete a purchase with cash, it makes the process quick and simple. It has been claimed that as much as 15% of incomplete sales are due to sellers waiting too long for the buyer to complete things on their side. With cash house buying, the wait is removed and the collapse is avoided.
Stronger negotiating positions
With cash in hand, a seller may be more encouraged to accept the offer knowing the funds are there and the sale won’t collapse. This could see the opportunity arise for the buyer to negotiate a lower price and still secure the property.
A chain break in a property transaction is common, but purchasing a house with cash can see that avoided. With cash ready to use, there is no need to rely on the sale of a property to secure the purchase of another one.
With no mortgage, there is no interest to pay and none of the costly fees that come from mortgages either. This means more cash can be put towards the offer or home improvement.
The disadvantages of buying a house with cash
The advantages of buying a home with cash seem to be fairly persuasive, but there are of course disadvantages too.
You could be overspending
Houses aren’t cheap, and it takes a lot of saving to reach the level of cash you need. It can mean that people divert all their cash towards the purchase, leaving next to nothing for other costs.
Should you opt for cash house buying, consider whether you can afford other housekeeping expenses or general costs. A faulty boiler, a broken-down car, or an exceptionally high utility bill could all see you facing huge costs that you may now not be able to afford.
Limited investment opportunity
Investing in property is potentially a lucrative way to make money. Especially if you gradually increase the property value with high-quality refurbishment. This does limit your options though. Your money might work better in a much more diversified portfolio.
Potential property problems
With no need for a mortgage, there is no requirement for a survey as requested by the lender. You can of course pay for a house survey, but you are not obliged to do so. If funds are limited due to the amount of cash going into the purchase, you may think skipping the survey will keep the process fast and more affordable. This could go against you. Structural issues, fire damage, and more could all have hindered the property and see you paying much more to rectify them.
You may purchase the home at a time when prices are their most affordable but that could mean the market is on a downward trend. This could then see you get significantly less for the home when you sell it.
Buying a house with cash process UK
Buying a house with cash in the UK can be a straightforward process and is much the same as buying a home where a mortgage is needed. You can skip the mortgage application step and, if you choose, ignore completing the property searches too. Although that is not recommended.
- Find your desired property.
- Make an offer, under, over or the same as the asking price. It’s up to you.
- Hire a solicitor or conveyancer for all the legal bits.
- Get a property survey completed. This is not required but is highly recommended.
- Receive results from searches (if completed)
- Exchange contracts with the seller and pay the deposit.
- Complete the cash purchase of the home by sending over the remaining monies and settling any costs for legal expenses.
At Gaffsy, we operate as cash house buyers, meaning we can buy properties fast, in as little as seven days in many cases. This means that those looking for a quick house sale can approach our team of expert property professionals and receive a free, no-obligation cash offer on their property. Then, should it be accepted, the property can be sold fast. Contact our team today to find out more.