Why cash buyers should consider funding

More buyers than ever are claiming they don’t need a mortgage because they have the cash to buy a property. But while they believe that the absence of funding will make them more attractive to vendors, particularly at the top-end of the market where good quality property is scarce, it is not always the best option. Even the wealthiest borrowers may want to consider gearing up to around 50 per cent of the property purchase price.

This enables them to keep gearing at sensible levels, retain a sizeable amount of cash, and take advantage of historically low interest rates (see article). Savvy wealthy buyers would rather use the bank’s money to buy a property than their own, which they could put to better use elsewhere.

Although cash suggests a quicker transaction, this is not necessarily the case. Using a broker, who knows which lenders can move quickly, can recommend the right funding and process the application from start to finish, does not have to take any longer. With the client’s permission, the broker can also let the agent know that the client is good for the money, giving the client an advantage over the buyer who is claiming, without verification from any professional, that he has the cash.

For others, keeping some cash back and not ploughing it all into a property makes even more sense. Foreign nationals who have their money overseas, for example, face a currency risk when converting it into Sterling to bring into the UK. If they intend to return to their country of origin at some point, they may wish to keep their cash out of the country for tax and other purposes.

Contact Private Finance for more details about structuring a property purchase in the most cost-effective manner.