Cash is probably the simplest way to purchase a property. When using cash to fund the purchase you will need to show where the money has come from in order to satisfy the Money Laundering Regulations. Cash purchases will typically come from a number of sources:
- Having already sold your previous home and holding money in the bank whilst you look for a new property.
- Releasing equity from another property to fund a further purchase
- Downsizing – if you are moving to a smaller property there may be enough equity left in your current home when you sell it to fund the purchase of a smaller property outright
- An inheritance or other windfall payment
Where available, buying a property using cash rather than a mortgage to finance it has advantages:
- You will own the property outright
- You do not incur the additional costs of arranging the loan and valuation surveys or the monthly costs of paying the money back
- It will allow you to purchase a property that mortgage lenders would typically not lend against.
- You don’t have to ask permission from any lender to make changes and can do what you want with the property (subject to planning permissions etc).
- Arguably it makes buying a quicker process as there will be fewer parties involved in the transaction and therefore fewer criteria to satisfy.
- You are not susceptible to increases the interests rates
Any cash tied up in a property, however, is not as liquid as it would be if held in the bank and it can take some time to release this money if you need it at a later date. Buying with cash does not allow you to leverage your buying power in the same way that you would be able to do with a mortgage.