House Purchase - Part Cash/Part Mortgage

Hi,

Just looking to get people's thoughts on buying a house partly with cash and partly through a mortgage - say half and half of the purchase price.

Most of the information I can find on the topic seems to be based on the idea of paying for a house entirely in cash, which is not an option.

Does paying half of the purchase price in cash make you a more attractive buyer to the seller and give you additional leverage? What are the other benefits or drawbacks?

Many thanks in advance.

sandra_b

I don't think you are more attractive to the seller - you still need a mortgage.
But if you have large deposit you are "more attractive" to the bank.

Peregrinus

Deleted User wrote: »

Hi,

Just looking to get people's thoughts on buying a house partly with cash and partly through a mortgage - say half and half of the purchase price.

Most of the information I can find on the topic seems to be based on the idea of paying for a house entirely in cash, which is not an option.

Does paying half of the purchase price in cash make you a more attractive buyer to the seller and give you additional leverage? What are the other benefits or drawbacks?

Many thanks in advance.

From the seller's point of view, you either need a mortgage to complete the purchase or you do not. If you do need a mortgage, he does not care whether your mortgage finances 80%, 50% or 20% of the purchase price. There is no additional leverage for you here.

As for other benefits, the only benefits I can see are the obvious ones; by taking out a lower mortgage the purchase will cost you less overall (because you will pay less interest) and your financial situation will be more resilient (because you will be less affected by interest rate movements).

sandra_b

sandra_b wrote: »

I don't think you are more attractive to the seller - you still need a mortgage.
But if you have large deposit you are "more attractive" to the bank.

Thank you. That's exactly what I thought. We already have mortgage approval so that part of it is sorted.

Peregrinus

Peregrinus wrote: »

From the seller's point of view, you either need a mortgage to complete the purchase or you do not. If you do need a mortgage, he does not care whether your mortgage finances 80%, 50% or 20% of the purchase price. There is no additional leverage for you here.

As for other benefits, the only benefits I can see are the obvious ones; by taking out a lower mortgage the purchase will cost you less overall (because you will pay less interest) and your financial situation will be more resilient (because you will be less affected by interest rate movements).

Thank you. Again, it's what I thought but thought I would ask as auctioneers always ask your financial situation when you bid on a house and I always just said we were mortgage approved and never mentioned cash element.

crossvilla

Unless you are cash rich I wouldn't suggest you tie up all your capital in a house. If you wanted to move again in say five years you could use that cash then when you're a more mature house buyer. If you can get a 80% mortgage I'd use that and hold on to your cash. It gives you options for the future, for renovations, alternative investments etc.

PhoenixParker

They don't do 100% mortgages these days (unless you're a negative equity mover) so all buyers with a mortgage are part cash/part mortgage.

You're no different to everyone else bidding except in your ability to maybe push your mortgage amount higher due to not being constrained by one part of the CB rules.

crossvilla

crossvilla wrote: »

Unless you are cash rich I wouldn't suggest you tie up all your capital in a house. If you wanted to move again in say five years you could use that cash then when you're a more mature house buyer. If you can get a 80% mortgage I'd use that and hold on to your cash. It gives you options for the future, for renovations, alternative investments etc.

Thanks for your reply.

I have thought a lot about doing this. However, we could have paid for the house outright in cash but decided to pay half in cash and then retain the same amount of cash again to pay for renovation/suppliers/builders after. Built in to this is a generous amount for potential problems or going over budget.

At the end of the entire process, we would still hope to have access to a decent amount of cash.

Myself and my wife both hate the idea of borrowing and are good at saving so our plan is to go with the smaller mortgage and even at that pay it off ahead of time.

PhoenixParker

PhoenixParker wrote: »

They don't do 100% mortgages these days (unless you're a negative equity mover) so all buyers with a mortgage are part cash/part mortgage.

You're no different to everyone else bidding except in your ability to maybe push your mortgage amount higher due to not being constrained by one part of the CB rules.

Thanks for your reply. Yeah, I get that side of it. The purchase price is quite high so I was guessing that we would be bringing more cash to the table than most of the rival bidders and just wondered if it would make any difference in negotiating with vendor at the business end of the bidding. But I can see now it won't.

GingerLily

DO NOT TELL THEM YOU HAVE 50% CASH

They'll assume you can get a bigger mortgage and gauge you for a bigger price, tell them you are mortgage approved and leave it at that.

PhoenixParker

Deleted User wrote: »

Thanks for your reply. Yeah, I get that side of it. The purchase price is quite high so I was guessing that we would be bringing more cash to the table than most of the rival bidders and just wondered if it would make any difference in negotiating with vendor at the business end of the bidding. But I can see now it won't.

The most likely outcome of their knowing you have a Wodge of cash is that they'd push harder for a higher price knowing you can potentially go there.
Keep schtum on your financing except to mutter about stretching yourself thin.

PhoenixParker

PhoenixParker wrote: »

The most likely outcome of their knowing you have a Wodge of cash is that they'd push harder for a higher price knowing you can potentially go there.
Keep schtum on your financing except to mutter about stretching yourself thin.

I've kept my cards close to my chest and every increase in bidding I have mentioned that the increase will have to come out of my budget for the renovations/build after. All I have said is that I am mortgage approved and purchase is not contingent on sale of another house.

ted1

Deleted User wrote: »

sandra_b wrote: »

I don't think you are more attractive to the seller - you still need a mortgage.
But if you have large deposit you are "more attractive" to the bank.

Thank you. That's exactly what I thought. We already have mortgage approval so that part of it is sorted.

Just because you have approval doesn’t necessarily mean the bank will let you draw it down.

The advantage of being a 100% cash buyer is that they can close fast and regardless of any planning issue and structural report etc

Tenigate

[Deleted User] wrote: »

Thank you. Again, it's what I thought but thought I would ask as auctioneers always ask your financial situation when you bid on a house and I always just said we were mortgage approved and never mentioned cash element.

Not going to read all this thread but, your situation really isn't that special. There are no 100% mortgages any more so if you're not a 100% cash buyer, you're relying on a mortgage. Best you can do is explain you're not part of a chain (i.e you're not relying on selling a house as a condition of buying the new one)- to me that's the most important thing- and that you have loan approval for the balance.

Wesser

This is just a 50% deposit or 50 % LTV. You are not in any different situation to anyone else except you are borrowing less.