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How to buy a house without a mortgage

| Insurance

Buying a house without a mortgage certainly isn’t easy, but it is possible. Imagine the feeling of having no mortgage, knowing that your house is completely owned by you and not bought using money borrowed from a bank or another lender.

While for many people it can take decades to pay a mortgage off, there may be a way that you can buy a house without needing this loan in the first place.

There are many advantages of buying a house in this way.

How to buy a house without a mortgage loan

The most obvious way to buy your home outright is to save enough money over a period of time to do this. This may sound tricky, but you should have a think about your current lifestyle and how you may be able to cut back in some areas. Perhaps you go on a few luxury holidays a year, or regularly go out for meals or order lots of takeaways. If you’re serious about buying a home without a mortgage, then these luxuries might need to go.

According to research by the popular food delivery service Deliveroo, the average Brit spends around £1,000 per year on takeaways. This equals around £80 a month. In places such as London and Edinburgh, this average increases to over £100 per month. And according to Evolution Money, the average two-week holiday for a family of four costs around £4,792, and this total doesn’t include spends on food while you’re away. By cutting back on these lifestyle choices, you may find that you can save thousands of pounds for a house in just a few years.

Alternatively, you might be able to find cheaper home insurance or cut down on your energy bills. There are lots of ways you can save money if you look hard enough.

If you already have a home with a mortgage, it may be easier to buy your next home without having to borrow any money. As people get older, they often look to downsize. This means that your next house could cost significantly less than your current home. If you’ve already had your mortgage for a few years, you’ve likely paid a large chunk of it off. This equity could be used to pay for a smaller house in full. For example, you may sell your home for £400k with £250k of equity. You could buy your next home for £250k, making you completely mortgage free.

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Can you buy a house with cash?

When you hear people talking about a cash buyer, it doesn’t mean someone who pays for the house using physical cash. It means that they have the full asking price available to pay for the property immediately without the need for a mortgage or loan.

Firstly, there’s less chance of the sale falling through. When you require a mortgage, you need a bank or building society to borrow money from. The lender acts as the middleman and sometimes they can decide not to finance a mortgage or that the buyer can’t afford the property. Without the need for a lender, the seller knows that the buyer can afford the property and the sale will likely go through much faster.

Secondly, cash buyers are very desirable and so you could have a better chance of becoming the new owner of the property. For example, if someone else puts in the same offer as you but you’re a cash buyer and they need a loan, there’s a higher chance of you being accepted because cash sales tend to go through faster with fewer hiccups.

Finally, you’ll have more security when you buy a house in this way. Knowing that your home is paid for could be extremely beneficial if you were to run into financial problems because you wouldn’t need to worry about making the mortgage payments.

How to buy a house with no deposit

Buying a home with no mortgage is one thing, but buying a home without a deposit could be difficult. Almost every seller and mortgage lender will want some sort of downpayment to secure the house. However, there may be a few ways you can purchase a home without putting down a deposit.

You could make use of the Rent to Buy government scheme. Also referred to as Try Before you Buy or Rent to Own, this scheme allows you to rent a property with a 20 per cent discount on rent. This gives you a chance to save up some money and buy shared ownership of the property after a set period of time, usually up to five years. Instead of paying a deposit for the property immediately, you can rent it for a few years, giving you enough time to save up.

If you’re a first-time buyer, a scheme from Halifax allows you to purchase a home without putting a deposit down, but you may need to rely on some help from your parents or other relatives. The Family Boost mortgage works using a 10 per cent deposit that a family member must put into a three year fixed-term savings account. Once this has been processed, a mortgage can be taken out in your name (not your family members’ names). The deposit that goes into the savings account earns interest over the three years that it is in there and the total amount will be paid back to your family members who lent you the money, with interest, as long as you’ve stayed up to date on your mortgage payments. This means your family members could earn a reward for helping you to get on the property ladder and you’ll have secured a home without needing a deposit.

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