It seems as though mortgage and buying go hand in hand. And to some extent; they really do. For most potential buyers, buying a house means taking out a mortgage and paying off the mortgage for quite a few years. In principle, a potential buyer should have a mortgage pre-approval as that allows the seller to take the buyer seriously. In this day and age, sellers are capable of rejecting offers or going with lower offers just because a buyer doesn’t have a mortgage pre-approval. But then again, there are enough instances where people have bought a house without a mortgage. But, is it easy? And how does one even buy a house without a mortgage? Is it possible to buy a house without a mortgage in the UK? Here’s everything you need to know.
Rent-to-own concepts
Rent-to-own is a concept that is becoming popular in the UK. If your landlord is willing to sell their property then you both come up with a rent-to-own agreement under which you pay the landlord the monthly rent along with an option deposit. Basically, the option deposit gives you the choice to purchase the property after a set period, say 1 year or 3 years, or as mentioned in your contract. Based on the agreement, the owner will set aside a pre-decided percentage of your rent and put it towards the purchase if you do decide to buy the property. You can get in touch with local estate agents or find a property letting guide to know more about the detailed process of buying a house through a rent-to-own agreement.
Buying with cash
On paper, the easiest and most simple way to buy a house without a mortgage is by saving enough money to buy the house in cash. Of course, this requires discipline and dedication. This means putting a certain amount of money aside every month based on your house budget and buying timeline, reducing your expenses, saving every extra penny that you can find and cutting back in certain areas. For instance, you might have to drop ordering take out, and you might even have to stop picking up your morning coffee from your favourite cafe. While these costs might not seem like much, they eventually accumulate to become worth quite a bit! When you decide to buy a property with cash, you can also consider buying a property at an auction, as that might help you find a good property at a good deal.
Borrowing instead of taking out a loan
The third, and more common way, to buy a house without a mortgage is by borrowing money from family or friends. If you’re one of the lucky ones who have a great circle of friends and a supportive family, you could try to borrow some money from them to buy your new home. Of course, you’ll have to save a whole lot of money on your own too. But if you’re running a little low on funds or you’re close to crossing the budgeting finish line, your friends and family could help you out. Alternatively, if you’re planning on buying a house to give on rent or as an investment opportunity, you could always buy the property with a couple of friends or relatives. That way, you each put in a certain amount of money which is then used to fix a share percentage and you will not have to take out a mortgage.
Downsizing or taking out a private loan
If you already own a home and are planning on downsizing or moving, then you can use the sale money to buy your new home. For instance, if you are moving from London city centre to a suburb in Leeds, you will probably be able to buy a fancy new home from the proceeds of the sale while still being able to save a whole lot of money. If you are a first-time buyer who is unwilling or unable to get a mortgage approval, you could always consider a private loan. Essentially, taking out a private loan is like a mortgage because it needs to be paid back, but the lending criteria are not as strict. Though keep in mind that a private lender is likely to charge a higher interest rate.
