Buying a house can be difficult.
There’s a lot to think about.
One of the first decisions to make is how will you buy it: With a mortgage or cash.
Read on for a comparison of these two methods.
How can some people afford to buy a house with cash?
You may be able to buy a house for cash. In other words, by paying 100% of the fee up-front.
This is often possible if you are selling another property first. It’s especially likely if you are downsizing (because smaller houses often cost less).
Some people take out a loan other than a mortgage if they do not quite have enough money to buy 100% of a house up-front. This approach is sometimes more common with businesses.
Advantages of buying a house with cash
Buying a house with cash means that you don’t need a mortgage.
So, you don’t have to pay high levels of interest. And if you are renting the property out, that 100% of the rental income goes into your pocket.
It also means that you save time applying for a mortgage and waiting for approval. This speeds up the process of completing the deal.
You will not need to wait for the bank to approve your mortgage. Sellers often view you as more reliable for this reason, too. They are more likely to choose you over other buyers.
Disadvantages of buying a house with cash
Buying a house with cash is that it could result in you overstretching your finances.
You save on mortgage costs, but there are other costs associated with running a house. These include utility bills, living costs, and more.
Spending all your money on one investment might not bring the best returns. Getting a mortgage may enable you to invest assets more beneficial for you in the long run.
Advantages of using a mortgage to buy a house
Mortgages make owning property possible for people otherwise be unable to afford it.
Secure a mortgage makes you more cash rich, which is useful for:
- Investments
- Emergencies
- Higher quality of life.
Disadvantages of using a mortgage to buy a house
Mortgages come with interest payments. In the long run, this means you pay more for your home than it’s worth.
And if your home loses value, you risk ending up in negative equity.
You also risk bring unable to keep up with repayments. This could be for unforeseen forces outside of your control, including:
- Energy price rises
- Employment loss
- Economic downturn.
And more.
What are mortgage rates currently like in the UK?
As of May 2025, mortgage rates in the UK remain elevated compared to the lows of recent years.
Rates for first-time buyers and existing homeowners have narrowed. But the former still face much higher initial rates.
When determining mortgage offers, lenders continue to scrutinize factors such as:
- Credit ratings
- Employment history
- Loan-to-value ratio (LTV).
Can I get a mortgage without a deposit?
It is very difficult to get a mortgage without a deposit. But it is sometimes possible.
Even in the current financial climate, you may be able to get one if:
- You have a high enough salary
- Your LTV is low.
There are other ways to make a deposit-free mortgage possible. For example, finding a guarantor, or accepting a gifted deposit from someone else.
