When buying a property with cash

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When buying property with cash, it is only natural that cash buyers are able to move far quicker than the average buyer, without the checks that a mortgage lender would ask a standard borrower and on the property, but the real question is whether using up all your cash is the best option?

Most houses are not considered to be a liquid form of asset. This usually takes time and expense to market a property for sale to be able to get the cash back out when you could need it for other things. If the property market is not right this may mean you would have to sell at a lower price than you wanted.

Gearing

For quite some now, many investors have seen the benefit of using the idea of gearing to help them use their money in a more effective way. Gearing is the term given to borrow money on a property. The more you borrow, the higher the “Loan-to-Value”.

This makes your money work better for you, improving the return you could get on your capital investment. This method is a commonly used by Professional Property Investors, who  rather than purchasing one property for £500,000, they could use the same cash to purchase four properties by taking out a £375,000 mortgage on each, (75% Loan-To-Value).

This does means that their profit increases, but the risk has been spread. Higher risk means higher returns, if property prices rose by 10% then return of £200,000 instead of just £50,000 if one property was purchased.

Those who have a larger deposit can still find a wide range of deals available. The visual valuations are not currently being carried out though because surveyors are unable to visit properties, which could delay the application. A few lenders are able to use automated or desktop valuations remotely, although these are less likely to be possible if you want to borrow a higher percentage of the property value.

I’ve already applied for a mortgage – will my application go through?

If you applied for a mortgage prior to the government’s lock down, in many cases your application should proceed as normal, although this will depend on your individual case and the lender involved. Some of the mainstream lenders out there have put applications already submitted on hold if they need a physical valuation which hasn’t been carried out. If your lender cannot conduct a remote valuation, your application could be delayed until a valuer is able to visit the property.

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