Cash buyer vs mortgage buyer – Which one is suitable for you?

Usually, a property purchase in the UK can be financed in two ways. You can either ask a bank or private lender for help to obtain a mortgage or buy it straight with the liquid funds in your account. Although your situation and financial strategy will guide you, there are certain advantages and disadvantages you should consider for both options.

Who is a cash buyer?

A cash buyer is someone who has the entire amount available in their account to buy a house without the lender’s help. Evidence of funds, such as a bank statement, and the origin of funds, such as the sale of any other asset or via income, must be reported.

Many sellers prefer cash buyers since they can avoid the several processes required for mortgages.

Who is a mortgage buyer?

A mortgage buyer borrows money from a bank or lender to fund property acquisition. This type of buying is the most prevalent in the UK, with more than 60% of property purchasers needing to borrow money to buy their homes.

By means of smaller monthly payments via their income, mortgages boost the buying power of homebuyers and let them spread the expense over several years. However, as the lender has to do financial checks and other procedures to guarantee the borrower can repay the loan amount, mortgage approvals can delay the buying process.

Let’s consider the advantages and disadvantages of a cash buyer compared to a mortgage buyer.

Which is better in today’s London market?

Given the competitiveness of London’s property market and the extra time it takes to get a mortgage approved and sanctioned, most sellers are probably going to prefer cash purchasers. Average property prices in the capital, nevertheless, are almost 85% to 90% more than the average prices anyplace else in the UK, thus most Londoners are left with no choice but to fund their property purchase with the help of a mortgage.

What’s a better option depends entirely on your circumstances, financial plans, and goals. Familiarising yourself with the London property market and its trends is a good place to start when deciding how to finance your property purchase.

When do sellers prefer or insist on a cash buyer?

Sellers opt forobviously prefer a cash buyer when they are looking for a quick sale. A typical scenario would be when the seller is selling their primary residence to upgrade to a bigger home and is, therefore, part of a chain and looking to avoid delays. Situations, where the property itself cannot get a mortgage due to age or structural issues, can also be a reason for a seller to look for a cash buyer.

What’s best for your situation?

Whether you buy a property outright with cash or get a mortgage will depend entirely on your circumstances and finances. Your risk tolerance levels and long-term goals will also be crucial in this decision. Knowledge about the property buying process and the calculation of monthly payments using a mortgage calculator and potential returns using an ROI calculator will help you make the right choice. You can also browse our investor guide and read about the most common mistakes for a smooth property-buying experience in London and the UK.

As a leading estate and lettings agent in London, we help investors find top property hotspots and guide them through buying and managing their property investments. Contact us to learn more.