Cash buyer considerations

Housies

Hi All,

I may be in the fortunate position of soon being able to buy a property in cash to live in. However I am wondering if it is really the best option. My thoughts were:

Pros:
- Stronger position to potentially negotiate better prices
- More likely to have offer accepted
- Reduced fees from mortgage applications, lenders survey etc
- More security in unemployment/redundancy situation

Cons:
- Poor diversification - "too many eggs in one basket"
- Mortage rates are low, returns could be greater elsewhere
- Miss out on 25% HTB ISA bonus

Is there anything else I should consider?

Thanks

eddddy

Housies wrote: »

Pros:
- Stronger position to potentially negotiate better prices
- More likely to have offer accepted

Hmmm... I'm not sure I'd agree.

As a cash buyer, a seller might prefer you to somebody who needs a mortgage because:

• the sale could go through more quickly, because you don't have to wait for a mortgage offer (assuming the seller wants a quick sale).
  
• there isn't the risk of a sale falling through, because your mortgage application is rejected.

But there's no real reason why a seller would accept a lower offer from a cash buyer, than from somebody who needs a mortgage.


(Some people would also add the 'pro' that they could consider an unmortgageable property - and then refurb it to make it mortgageable. But perhaps that's not the sort of thing you want to do.)

Housies

I saw a few sites online suggesting that being a cash buyer might give you a bit more leverage to negotiate since as you say there is less risk of it falling through, and potentially a quicker turn around. Suppose it depends both on the seller and what other offers they have.

Would be interested to know if anyone in London had any success negotiating on the price off the back of being a cash buyer?

Or alternatively if any sellers in London would consider negotiating a bit lower for the sake of having a cash buyer?

Thrugelmir

Housies wrote: »

- Miss out on 25% HTB ISA bonus

Nothing to stop you opening a HTB ISA and claiming the bonus. Claim the free money.

Hoploz

It's your attitude to risk which will determine what you do here.

If you like to play safe, are looking for a home and nothing more, then buy cash and sit pretty.

If you want the best investment options, buy a series of properties with say 25% deposit in cash and the rest mortgaged, and become a landlord. That would be much more hassle but would be better leverage spreading the cash for better profit.

Or use all your cash as deposit on a much bigger house, which you may enjoy living in more, and will grow in £ more following % rises.

Or buy with small deposit and invest the rest elsewhere.

My personal preference would be to own a bigger house. You get the option to rent a room if you want a little extra income - it might even cover your mortgage payments altogether!

Housies

Thrugelmir wrote: »

Nothing to stop you opening a HTB ISA and claiming the bonus. Claim the free money.

HTB ISA bonus is only available if you are buying with a mortgage. Fair enough I suppose.

Hoploz wrote:

My personal preference would be to own a bigger house. You get the option to rent a room if you want a little extra income - it might even cover your mortgage payments altogether!

Having done a bit more research on the prices in the areas I am interested in, I am leaning towards this actually. I am wondering if mortgage providers ever take into account this potential extra income? Obviously it shouldn't be relied upon, but could make the loan more favourable if they factored this into your earnings.