Can You Buy a House Without a Mortgage?

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Can You Buy a House Without a Mortgage?
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Most homeowners throughout the UK have a mortgage. It typically forms the backbone of any house transaction – and therefore, it is important to understand what exactly one is, and why it benefits you.

On the other hand, there are people who consider the possibility of buying a house without a mortgage. While this isn’t the norm, it is a commonly-researched area, and that’s why we have provided you with all the important answers in the blog below.

So, read on to find out: ‘Can you buy a house with a mortgage?’ – along with the answers to many other questions surrounding this topic.

What is a Mortgage?

A Mortgage is a loan which enables you to purchase a property. Typically, a mortgage lender will lend you the money for the house, which you will then pay back in monthly instalments. Lenders charge interest on these monthly payments, so they eventually make back more money than they loaned to you.

A mortgage makes it possible for the vast majority of homeowners to buy a property. Without one, they would usually be forced to rent. Unfortunately, there are many requirements you need to meet to be granted a mortgage on any given property.

The smaller the amount of money that you borrow, the less you will have to pay back in interest payments. This is why most homeowners try to raise as much capital as possible, in the form of an up-front ‘deposit’, so they pay less interest over the following years.

Can You Buy a House Without a Mortgage?

Yes, you can buy a house without a mortgage. This type of buyer is known as a ‘cash buyer’ because they have all the money available to them up-front (and are therefore relying on cash, rather than credit).

Why would you want to buy a house without a mortgage?

If someone is able to pay for a property up-front, without needing a loan, then this is usually a very attractive idea. While this option requires a greater up-front payment, it means that the entire property belongs to them as soon as it is paid, and there is no need for further monthly repayments to a lender. It is also cheaper in the long-term to buy a property up-front, as you do not have to pay interest to a mortgage lender.

It is very common for property developers to buy a house up-front, without a mortgage, so it maximises their Return on Investment when they makeover the house and sell it.

Disadvantages of buying a house without a mortgage

Although buying a house without a mortgage seems like a desirable scenario from a financial perspective, it can still bring significant challenges. There are, believe it or not, downsides to taking this approach.

The process of raising enough capital to purchase a house outright can be extremely challenging. For some people, it requires ‘tightening the purse strings’ and being very disciplined about their investments and outgoings. This approach can be particularly draining after a few years, and may require sacrificing enjoyable (but pricey) experiences such as holidays.

Secondly, if a property is listed as being for ‘cash buyers only’, then this often means that there are faults with the house. These issues will generally be disclosed to you, so you understand exactly what you are getting for your money – but nevertheless, houses targeted at cash house buyers are usually in worse condition. You should always consider the hassle and money involved in fixing any issues with these types of properties, before jumping into a purchase.

When you purchase a property as a cash house buyer, you will also have to provide clear proof of where your money has come from. While these types of checks are no different to someone buying a house with a mortgage, a cash house buyer may raise eyebrows (especially if they haven’t purchased a property outright before) if they offer the full sum of money without clear proof of where it has come from.

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