Thinking about buying a house without a mortgage? Nobody plans on being in debt, especially for the foreseeable remainder of their adult life. Nevertheless, the tradition of taking out a high-value loan with a bank or lender and slowly paying it back with interest has become the norm. The average mortgage is said to take around 25 years to pay back, with some repayment schemes lasting up to 40 years. Of course, this timeline can increase significantly if you decide to upscale and move further up the property ladder.
With its etymological origins rooted in old French, the word mortgage literally means “dead pledge”. As such, we can all agree that it is something we would avoid altogether if it were possible. Indeed, the concept of mortgages becomes all the more macabre when you consider that rates can change over time and if you fail to make a repayment, you could end up losing your home altogether.
Unless you’re incredibly wealthy, the prospects of buying a house without a mortgage might seem bleak. We’ve put together this guide to illuminate the path toward clearer finances, demonstrating that it is indeed possible to live mortgage-free with a little planning.
If after reading our tips you still feel like a mortgage might be your only option – don’t despair. We’re here to help you consider your options and identify the most cost-effective mortgage solutions for you. As always, we highly recommend speaking to a financial advisor before making any definitive monetary decisions.
Without further ado, here are our top tips for living a mortgage-free life.
Buy a House Without a Mortgage:
If you are able to buy a house in cash, you should be able to offer considerably less than the asking price and still be accepted. As such, cash buyers make significant savings beyond being able to escape the financial burden of interest-laden mortgage repayments. Of course, buying in cash does not literally mean turning up with the cash in hand. Rather, you’ll simply have to demonstrate that you currently have the funds available to make your purchase without needing to take out a loan.
If you are still waiting for the proceeds of your own sale to come through before you have the funds required, then you will sadly not be considered a cash buyer. In such circumstances, the financial liberty that comes with living mortgage free can outweigh the hassle of temporarily renting or living with family and friends until your sale has been finalised. Nevertheless, we understand that this is a completely personal decision and won’t be plausible for everyone.
There are many different ways in which you can secure the cash you’ll need to buy a new property. Discover some of our top few below.
How to Buy A House In Cash UK
Naturally, the simplest way to boost your chances of buying a house without a mortgage is to start saving. Although this may take time, it will be well worth it in the long run. Start by creating a budget and cutting back on any unnecessary expenses, setting yourself a realistic savings goal and making sure you stick to it.
Find A Fixer-Upper
If you’re willing to invest time and effort into transforming your new property, it’s a good idea to look out for fixer-upper flats or houses likely to be on the market for a lower price. This will increase your chances of buying a home in cash rather than with a mortgage.
Consider Smaller, Non-Traditional Homes
Likewise, if you’re willing to compromise on space or consider non-traditional homes like buildings that have been repurposed, it’s much easier to step up onto the property ladder without being chained to the ground by a mortgage.
Take Advantage of Government Schemes
The British Government often has various schemes for helping first-time buyers to purchase a new home. For instance, citizens living in England and Wales can currently apply for a loan to put towards the cost of a new-build property and shared ownership schemes are now promoted across the UK as a whole. It’s also worth considering a Lifetime ISA to help you with your savings.
Is It Wise to Buy a House With Cash?
It is important to note that, even if you are able to purchase a house in cash, you will still need a solicitor or conveyancer to deal with all the legalities of your purchase. You should also consider the potential downsides of a cash purchase, such as having fewer liquid assets available to deal with emergency repairs. A financial advisor should be able to guide you on whether or not buying a house without a mortgage is a wise decision for you, assessing your current savings and cashflow, and considering your individual circumstances.
Rent to Own
Renting to own is perhaps one of the most accessible methods of buying a house without a mortgage. Also known as rent-to-buy schemes, rent-to-own programmes essentially allow you to continue living in your property as you would with a traditional rental. The homeowner will act as your landlord and take monthly payments from you by way of rent. They will likely use these payments to cover the mortgage.
You can continue to pay rent in this manner for up to five years. However, unlike traditional renters, after the first two years, you can declare an interest in purchasing the property. As soon as you decide to buy, you will automatically receive 25% of the rent you have paid so far, in addition to half the value that the property has accrued since you moved in.
The funds generated through such schemes are traditionally used to pay your deposit. However, when combined carefully with savings, this option could easily provide you with the opportunity to buy a house with no mortgage. Once again, we highly recommend speaking to an independent financial advisor to assess your options thoroughly before entering into any agreements.
Let to Buy
Although not necessarily a mortgage-free method, it would be unfair of us to discuss rent-to-buy options without considering their distant cousin, let-to-buy mortgages. Put simply, if you already own a mortgaged property, you might wish to let it out privately, using the profits you make to move into a new home.
Sellers sometimes agree to finance your purchase, particularly if the property they are looking to sell is struggling on the property market. It may be that their home is not considered traditionally attractive but you are still able to see the potential. In such cases, they might agree to accept regular payments directly from you until you have paid the full price.
It is worth noting, however, that most sellers willing to do this will be expecting you to secure a mortgage in the short- to mid-term. As such, if you don’t already have significant savings, a traditional loan may still be required. Conversely, if you’re almost able to buy a house in cash but are not quite there, owner financing could be just the boost you need to reach your target.
When looking at buying a house without a mortgage, we recommend speaking to an independent finance advisor throughout this blog and we couldn’t emphasise this more than with owner financing. There is naturally more risk involved in this process for both you as a buyer and the homeowner, especially since failure to make your payment on time could result in the seller losing their home. We would always advise against taking on too much of a risk.
Finally, if your credit score is simply too low to be able to secure a traditional mortgage and you have exhausted all other options, it may be worth looking into private loans. Nevertheless, we recommend taking advantage of our expert advice prior to taking this step, as private loans are full of inherent risk. We know the mortgage market inside out and may be able to recommend a healthier option first. No matter what you decide, always steer clear of loans with exceptionally high-interest rates and always consult an advisor.
Buying A House in Cash Vs With A Mortgage
As you can see, there are plenty of ways in which you can buy a house without a mortgage. Some of them simply require patience, dedication and saving, whilst others require you to think more outside the box.
It’s worth noting that forgoing a mortgage could reduce your ability to use your home as collateral for any loans you may wish to take out in the future. Regular repayments can also help to increase your credit score. As such, it’s crucial to consider the pros and cons of a mortgage-free life before you jump into any major decisions. We, therefore, recommend getting in touch with an independent financial advisor in advance of your property purchase.
Buying a House Without a Mortgage: Ready to Make Your Move?
Whether you’ve decided the mortgage-free life is definitely for you or are happy to stick with traditional ownership routes, contact Emma’s Properties to get one step closer to owning your dream home by potentially buying a house without a mortgage today by calling 0121 794 4916 or by emailing firstname.lastname@example.org