Buying a house in cash is an attractive option for anyone who can afford it.
It opens many interesting doors and helps buyers sidestep long property chains and regular payments.
One of the most common questions people in this position ask is, ‘Can I buy a house cash then get a mortgage?’.
We’ve explained whether this is possible in our blog below.
Can I buy a house in cash and then get a mortgage?
Yes. Buying a house in cash and then getting a mortgage afterwards is possible. This is commonly known as ‘delayed financing’.
When you take out a mortgage after paying in cash, you unlock some of the equity in the house.
You can then use this money in other ways. For example, you could invest in another property. Or you could use the cash to fund the lifestyle you’ve always wanted.
Benefits of being a cash buyer
Buying a house in cash makes you a more attractive buyer to the person selling.
This is because there are benefits to selling to cash buyers.
You may even get them to agree on a reduced price. Many cash buyers pay less than regular buyers because of the speed and certainty of their buying.
For a bank to give you a mortgage after buying a house in cash, there are certain conditions you’ll have to meet. These can vary for each organisation, for example:
- Some banks want you to live there for at least 6 months before doing this.
- Some might ask you to register the Title Deeds before you apply.
But some banks don’t enforce many rules at all. Speak to them directly for clarification.
Why buy a house for cash and then get a mortgage?
There are several advantages to this method of buying a property.
Firstly, buying a house in cash helps you to close the deal quickly. It often reduces stress and hassle.
It also means you can capitalise quickly if the market is in excellent condition. This might happen if interest rates are low, but you suspect they will rise soon.
Buying a house in cash also makes you more attractive to sellers. You can fend off competition and ensure you get the property you want. You could also negotiate for a better selling price.
Refinance funds can also be used for other purposes. If you’ve bought a house in poor condition, you can use the money for renovations.
You might expand your portfolio even further by investing in another property.
Drawbacks of buying a house for cash and then getting a mortgage
There are drawbacks to delayed financing for a house. You should consider these before you jump into this method.
When you apply for a mortgage after buying a house in cash, the bank will determine what they think it is worth.
There is no guarantee that they will value your property at the exact figure that you did. If the appraised value is lower than your purchase price, it can hamper the financial positives of your deal.
Applying for a mortgage can be a tedious process, and many people don’t enjoy it. But when you use delayed financing, you’ll be forced to complete the application again.
Your costs will increase if you pay a solicitor to handle this process.
As mentioned above, you’ll also need to jump through certain hoops on this route. Some banks want you to wait six months.
Or they might require your mortgage to have a certain level of deposit, meaning you can’t take out as much money as you’d hoped.
Things to consider when you buy a house cash then get a mortgage
Buying a house in cash and then getting a mortgage is an excellent option if you have the funds.
It can put you one step ahead of other buyers. But it is not always as straightforward as it seems.
Extra solicitor’s fees will often be involved because you are going through the buying process twice.
If your legal expert charges by the hour, your outgoings can increase. This needs to be factored into your financial calculations.
Remember that the maximum amount you can loan is the appraised value of your property.
If the bank disagrees with your valuation, your financial position might not be as strong as you’d hoped.
You should thus make sure your valuation is accurate. Gather several independent quotations, and don’t overpay for a house.
Your timing is critical to the amount of profit you make.
Even once you’ve bought the house in cash, some people wait a while before getting a mortgage.
If the interest rates are very high, waiting until mortgages are more affordable might be better.
You can do many things with the extra equity you receive after taking out the mortgage.
Investing in another ‘Buy to Let’ property is very popular, but you might want to use the money for personal reasons.
Funding a retirement or a lavish holiday are two common examples. Make sure you budget clearly and intelligently.
Poor decisions can cause some people to regret taking this route.
