Buying outright: Pros and cons?

Alibear

Hi again. Sorry to start another thread but after speaking to friends in a similar situation, my bf and I have decided to look at the option of buying outright. We have a lump sum budget, with a some 'rainy day' cash left over.

I have a few small debts which would easily be cleared in a year and we plan to save quite hard too. I should easily be able to get a small mortgage £30k-£50k, for example, to update or improve the prpoerty if needed.

I basically want to know if there are any cons to buying outright? As house prices are pretty low at the moment it seems a no-brainer to me but I'm wondering whether it's best to have a mortgage secured on a home or not... Any answers gratefully received.

Thrugelmir

Clear your debts before buying outright.

No advantage in having a mortgage at all if you dont need to borrow the money. Why pay interest unnecessarily?

Alibear

Thanks, that's what I thought. it seemed like a no-brainer to me but I've been reading that it can be a good idea to have a small mortgage too, but I couldn't really see why!

ginvzt

Since you have other debts, I would be looking to repay those first, as thy will probably be at a higher interest rate than a mortgage. You could always get a tracker/flexible mortgage that allows unlimited overpayments, so you can repay it at any time you have saved up enough (for example, instead of paying the debt you have at the moment).

Thrugelmir

Alibear wrote: »

Thanks, that's what I thought. it seemed like a no-brainer to me but I've been reading that it can be a good idea to have a small mortgage too, but I couldn't really see why!

Nor have debts when you have savings. As you'll be incurring higher interest than your earning.

hopefulinvestor_2

I was told to keep a little mortgage to save going through the application process again. If you have a mortgage the bank you are with should lend no problem but if you go without a mortgage and your circumstances have changed they might say no.

At the moment I have a mortgage of about £100 paying I think about £5 month, at the end of the term I will still have payed less interest than the fee they wanted for me to pay it off outright.

getmore4less

Raising cash on an unmortgaged property may not be easy in the future.

Lending criteria could change and your income could falter.

So if you have the slightest chance you might need some capital in the future why not do it now when you can do it as cheap as you need.


You allready have the legal process to go through an the extra cost of setting up a mortgage now will not be much moire
In the future it might cost more.

A low cost offset will leave you with no interest to pay unless you draw funds.

Also give you the opportunity to do other investments with cheap money should you find them. Also a great cash flow tool for any emergenncies.

Have the option of a mortgage also widens your search since yoiu can go over the cash budget if a bargain comes up.