The financial aspects of buying a property can be complicated. What makes a competitive offer? How much should you spend on a survey? Can I afford the monthly energy bills and council tax?
One of the biggest puzzles relates to the deposit. Is it better to keep some savings back and rely on a mortgage to cover the balance, or should you put down the full amount and buy the house outright?
Being a cash buyer – in other words, being able to afford the property without needing a loan or to sell your existing home first – has many benefits. However, there’s no denying that it’s a big commitment and should not be entered into lightly. Take a look at the main pros and cons of purchasing a house with cash and decide whether or not it’s the right avenue for you.
Pros of being a cash buyer
You know what you can afford
Instead of having to work out loan-to-value ratios and calculate affordable mortgage repayments, as a cash buyer you know exactly what you can afford. This makes it much more simple to browse the housing market and means you can be confident with your maximum offer.
You’re seen as a reliable buyer
Cash buyers are highly sought-after by those selling their homes. This is because the offer is more reliable than one that’s tied up in an existing property sale or dependent on a mortgage rate that could fluctuate at a moment’s notice.
Stating that you’re a cash buyer means that your offer is more likely to be accepted over and above others, even if the other offers are higher.
The process is less stressful
There are lots of moving parts involved with buying a house. A conveyancer – a specialist in the legal process of property purchases – can help you to understand and manage each element of the process, but situations can occur beyond their control which could delay or prevent a sale.
Financial reasons why a sale could ‘fall through’ include the buyer’s existing house not selling fast enough or an unfavourable mortgage negotiation making the original offer unaffordable.
A cash purchase means fewer moving parts and less time pressure, making the process much less stressful for both the buyer and the seller. It also minimises financial pressure for the buyer.
Cons of cash property purchases
It ties up your assets
While being a cash buyer means avoiding the potential pitfalls that could price you out of your offer, this doesn’t mean that it’s without risk. Investing heavily in one property ties up your assets, and the next time you move it’s likely that you’ll be reliant on your house selling in order to buy a new home.
House prices could fall
House prices have been rising for years but are forecast to drop this year due to high inflation and interest rates impacting mortgage affordability.
Falling house prices reduces the value of existing homes, so if you invest your cash into a property when there’s a downward market trend it could lead to you losing money in the long run.
