Monthly Archives: November 2015

Buying property with cash vs mortgage

Conveyancing cash buyerPaying for a home by cash looks smart as it avoids sinking deep into a long term loan that needs to be paid for years to come. A mortgage is a long term cash loan secured on a house whose terms may exceed up to 30 years divided into monthly payments along with an interest on the loan. However, a mortgage can cost you nothing up front and keep your money or savings in the bank except what has to be paid in disbursement, solicitor’s fees, and other premiums on the house. Both ways each have good sides and down sides, and we will be discussing them in this article. But, first we should at least define them in separate headings.

Cash Payments

This is simple; you will be paying for the cost of house with the cash or the savings in your hand. You will pay the price with paper cash payment or through bank transfer based on how the seller wants the money from you against his/her property. A cash payment might be divided further into small terms for each stage of completion of the property transaction until the final payment is made.

Mortgage

A mortgage is a loan that bank or house financing companies give you against a property in England and Wales. It is a good option for both a wealthy person and a middle class resident of England or in Wales because paying a large cash payment will leave a person with an empty account or not liquid enough to cover future payments against any running costs on the house. You  simply pay the premium price on the house and the fee of the Mortgage Company, the remaining amount of the mortgage to be paid in small term monthly payments. There are many different types of mortgages with different ending terms.

Cash Payment in Detail

When someone buys a house with cash, they have the time advantage of finding any good property in any county of England and Wales. They can easily decide where they can put their money on and also check for any rise or fall in the prices of the properties in one property market of a county or in any other residential societies in England.

Advantages of Cash Payments

There are many upsides of buying home with cash in hand. A few of these advantages are outlined as below:

No Credit History Needed

Getting a mortgage will require you to check for your credit score; on the other hand a cash payment will not require credit history check. However, the buyer must have a large amount of cash in their savings to pay for the house price.

Risk Free Saving

A house bought with Cash is a risk free Asset, you are spending money on the house with the risk of losing any, on the other side mortgage will require you to pay a premium amount along with monthly paybacks, and in case you are required to sell the house before the end date of the mortgage, you will have to pay the penalty as written in the mortgage deal.

Negotiating power

Having cash in hand will give the buyer negotiating power that might not enjoy in case of mortgage payment. It can help in bringing the cost down as compared to mortgage payments.

Disadvantages

The disadvantages of cash payments are listed below:

Less Liquidity

As you are going to pay with cash and other liquid assets, you might face future shortage of liquid or cash assets by your side.

No tax advantage

Buyers with cash payment will not receive any tax advantages as allowed to mortgage buyer on their income taxes.

Advantages and Disadvantages of Mortgage

Few are some upsides and downsides of mortgage payments on homes in UK:

  1. A mortgage will give you breathing space for saving your liquid and cash assets in your bank account in case of any future payments on the cost of repairing the property or other running costs of the house.
  2. Mortgaged homes are tax deductible on the interest that people pay to the mortgage companies on yearly bases.
  3. A mortgage on a house is a safe payment, money paid to the bank will stay safe until you decide to sell your house. Moreover, if the price of the home goes down so does the mortgage and the interest on it, therefore, mortgage is often considered as safe investment.

Summary

To buy a home with cash or mortgage depends upon a several different merits that you have to decide yourself. If you have less cash than the full amount, you should require a mortgage otherwise you will find yourself in trouble managing the future expensive of your home. If you need more information about buying a home in England, you can visit Conveyancing for cash