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  • FIRST POST
    • VirgoWhite
    • By VirgoWhite 6th Aug 18, 3:39 PM
    • 3Posts
    • 8Thanks
    VirgoWhite
    Mortgage vs Cash buying
    • #1
    • 6th Aug 18, 3:39 PM
    Mortgage vs Cash buying 6th Aug 18 at 3:39 PM
    Hi, My husband and I are about to buy our first house. We have a deposit of around 100k, but are trying to work out how fund the rest of the 400k property. We have a mortgage agreed in principle which for balance of the house, however between our parents they have offered to lend us the money to buy the house and repay it back to them without interest.
    Does anyone have any experience with this? We've done a little research into buying a house with cash but its difficult to find anything which outlines the pro's and con's of the process?
Page 1
    • somethingcorporate
    • By somethingcorporate 6th Aug 18, 3:45 PM
    • 8,996 Posts
    • 8,722 Thanks
    somethingcorporate
    • #2
    • 6th Aug 18, 3:45 PM
    • #2
    • 6th Aug 18, 3:45 PM
    Aside from the pros and cons of buying with cash you also need to consider the pros and cons of borrowing such a collosal amount of money from your family. Check out the lending forums to see how families can be torn apart over borrowing small sums...
    Thinking critically since 1996....
    • Comms69
    • By Comms69 6th Aug 18, 3:54 PM
    • 5,814 Posts
    • 6,037 Thanks
    Comms69
    • #3
    • 6th Aug 18, 3:54 PM
    • #3
    • 6th Aug 18, 3:54 PM
    Aside from the pros and cons of buying with cash you also need to consider the pros and cons of borrowing such a collosal amount of money from your family. Check out the lending forums to see how families can be torn apart over borrowing small sums...
    Originally posted by somethingcorporate
    Including what might happen if you split up
    • somethingcorporate
    • By somethingcorporate 6th Aug 18, 3:56 PM
    • 8,996 Posts
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    somethingcorporate
    • #4
    • 6th Aug 18, 3:56 PM
    • #4
    • 6th Aug 18, 3:56 PM
    Including what might happen if you split up
    Originally posted by Comms69

    That too!!
    Thinking critically since 1996....
    • foxy-stoat
    • By foxy-stoat 6th Aug 18, 4:00 PM
    • 3,197 Posts
    • 1,800 Thanks
    foxy-stoat
    • #5
    • 6th Aug 18, 4:00 PM
    • #5
    • 6th Aug 18, 4:00 PM
    Hi, My husband and I are about to buy our first house. We have a deposit of around 100k, but are trying to work out how fund the rest of the 400k property. We have a mortgage agreed in principle which for balance of the house, however between our parents they have offered to lend us the money to buy the house and repay it back to them without interest.
    Does anyone have any experience with this? We've done a little research into buying a house with cash but its difficult to find anything which outlines the pro's and con's of the process?
    Originally posted by VirgoWhite
    Sweet - get each set of parents to draw up a loan agreement stating repayment terms and loan period get them to transfer you and your husband £150,000 each -and go house buying.

    You will be asked for bank statements from the bank accounts it came from and maybe other information from your solicitors.

    You will be cash buyers so should be in a stronger position to buy.

    As for pros and cons - there is pros and cons on both sides but if you and your parents cannot work them out then probably best just get a mortgage and leave their money in their savings accounts.
    • ellectrastar
    • By ellectrastar 7th Aug 18, 3:22 PM
    • 118 Posts
    • 14 Thanks
    ellectrastar
    • #6
    • 7th Aug 18, 3:22 PM
    • #6
    • 7th Aug 18, 3:22 PM

    You will be cash buyers so should be in a stronger position to buy.
    Originally posted by foxy-stoat

    I would disagree with this. Being a cash buyer myself it has not proven to be a benefit at all. At the end of the day if you offer one amount as a cash buyer, and someone else offers more but with a mortgage, the seller/estate agent will always go for the higher offer. How it comes makes no difference.



    The only beneficial thing is if you're not in a chain, but even then it doesn't always pay. I made a cash offer on a property, then reduced it as I found the property had a solar panel lease I wasn't too keen on. I was then "outbid" by someone in a chain that needed a mortgage. Of course they didn't say by how much, only that if I reverted back to my original offer I would secure the property... So neither not being in a chain, nor paying cash made a blind bit of difference.
    • eddddy
    • By eddddy 7th Aug 18, 7:53 PM
    • 7,244 Posts
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    eddddy
    • #7
    • 7th Aug 18, 7:53 PM
    • #7
    • 7th Aug 18, 7:53 PM
    One suggestion...

    Even if you decide to buy for cash, you would want to know if the property is mortgageable - for when you come to re-sell it.

    So tell your solicitor and surveyor to tell you about anything that might make the property unmortgageable.


    Or... a big benefit of being a cash buyer is that you could look for a property that is cheap because it's unmortgageable (e.g. because it needs renovation), and you can do it up, and make it mortgageable and therefore make a profit.

    (But if you get it wrong, you could also make a big loss.)
    • ognum
    • By ognum 7th Aug 18, 8:14 PM
    • 4,620 Posts
    • 7,390 Thanks
    ognum
    • #8
    • 7th Aug 18, 8:14 PM
    • #8
    • 7th Aug 18, 8:14 PM
    I would disagree with this. Being a cash buyer myself it has not proven to be a benefit at all. At the end of the day if you offer one amount as a cash buyer, and someone else offers more but with a mortgage, the seller/estate agent will always go for the higher offer. How it comes makes no difference.



    The only beneficial thing is if you're not in a chain, but even then it doesn't always pay. I made a cash offer on a property, then reduced it as I found the property had a solar panel lease I wasn't too keen on. I was then "outbid" by someone in a chain that needed a mortgage. Of course they didn't say by how much, only that if I reverted back to my original offer I would secure the property... So neither not being in a chain, nor paying cash made a blind bit of difference.
    Originally posted by ellectrastar
    I agree with much of this and I have bought many times as a cash buyer.

    As a seller I would actually prefer a mortgaged buyer. The mortgaged buyer has much more comitment to a future property it is much more difficult for them to be fickleness and just all away as they will have to go through the whole process of arranging a mortgage again if they do.

    As a cash buyer I have called time on a few properties when I feel the seller is slow or not fully committed or there is a blip in the purchase.

    Donít expect any extras for being a cash buyer, lots of people do and they become surprised.
    • Smellyonion
    • By Smellyonion 7th Aug 18, 8:24 PM
    • 136 Posts
    • 86 Thanks
    Smellyonion
    • #9
    • 7th Aug 18, 8:24 PM
    • #9
    • 7th Aug 18, 8:24 PM
    However you end up managing it, you will save a huge amount on interest.

    Even with a decent rate of 2% 300k at 25 years is an 84k interest saving and you'll pay it off 5 years earlier.
    • getmore4less
    • By getmore4less 8th Aug 18, 5:15 AM
    • 33,592 Posts
    • 20,320 Thanks
    getmore4less
    You could look at YBS offset plus or similar facilities.
    (just don't tell YBS you will be 100% offset day one)

    https://www.ybs.co.uk/mortgages/offset-mortgages.html


    A great 1/2 way house overcomes most of the potential pitfalls of family borrowing and having to set up loan agreements with all the benefits of no interest utill they want/need their money back faster than you can pay them.

    The way it works is each set of parents sets up an account(that they own and you cannot touch) with the money they want to lend you and that offsets your mortgage so there is no interest on the offset bits.

    They can draw it down as if you were making an agreed payment or get it all back if they need it for anything, you never have the money.

    You keep a 3rd account topped up, as long all three total the same as the mortgage amount outstanding there is NO interest.

    AS you plan to be 100% offset the interest rate is not that important unless the family want their money back so you look for the lowest cost route to set up which will be any higher rate/no fee options and hopefully reasonable other fees.
    Get the longest term possible for the most flexible repayment scheme


    RBS offer the option to keep your payment as if it was a full repayment mortgage or you can reduce the payment and create a surplus in your offset account.

    Over time you will have paid back the parents and created your own offset pot that you can use to manage cash flow.
    • Teasedale
    • By Teasedale 8th Aug 18, 12:26 PM
    • 45 Posts
    • 29 Thanks
    Teasedale
    Donít expect any extras for being a cash buyer, lots of people do and they become surprised.
    Originally posted by ognum
    Cash is king when buying distressed property, which I've done a bit of.

    Beware of auctions though, people do get carried away with the excitement of the moment!
    • ellectrastar
    • By ellectrastar 9th Aug 18, 1:10 PM
    • 118 Posts
    • 14 Thanks
    ellectrastar

    Donít expect any extras for being a cash buyer, lots of people do and they become surprised.
    Originally posted by ognum

    Absolutely - we thought it'd be better and have learnt that it's seriously not. Doesn't stop the EAs commenting on it though, saying "Oh! A cash buyer! What a great position to be in." To which I reply "Really? Well it hasn't worked for me yet..."
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