Being in a position to purchase a property as a cash buyer can have multiple advantages.
Sellers like the comfort that there’s no chain and no likelihood of mortgage issues. You can often complete the transaction more quickly. And now, new research has found that cash buyers also pay, on average, 9% less for a property than those buyers using a mortgage.
In this guide, read about the latest research which shows a cash buyer pays £20,000 less for the average home. And, if you do need a mortgage to buy, discover three tips that can put you in pole position when it comes to getting your offer accepted.
Cash buyers pay 9% less for property
New research from estate agent comparison site GetAgent has revealed that the average price paid by cash buyers over the last year is £220,100. This is 9% cheaper than the average price paid by buyers with a mortgage (£240,758).
The research found that cash buyers in Falkirk are bagging the best discounts (24% compared to people buying with mortgages) while Hartlepool sees the biggest cash discount in England, with properties selling to cash buyers for 21% less.
Properties bought with cash sell for 12% less in the North East and North West, while London is the only region where cash will cost you more – around 6% more than the average price paid by a mortgage buyer.
Founder and CEO of GetAgent, Colby Short, says: “Cash is always king when it comes to pretty much any transaction and this doesn’t change just because you’re buying a house. In fact, it becomes even more pertinent.
“Cash buyers are preferable to many sellers because they provide a much simpler transaction with fewer hoops to jump through and often come without a complicated chain.
“The flip side of this convenience is that cash buyers have a far stronger position when it comes to negotiations and often sellers will accept a more sizeable reduction for the speed and convenience of a cash sale.”
Vendors will often prefer a cash buyer as it can often mean a quicker, smoother selling process with less paperwork and no onward chain. If someone is looking for a quick sale, this can be particularly appealing.
While being in a position of being able to buy for cash can help you to secure a great price on a property, there are also ways that you can put yourself in pole position to buy if you need a mortgage. Here are three tips.
3 ways you can put yourself in a great position to buy – even if you need a mortgage
1. Check your credit history
If you apply for a mortgage to buy a property, your lender will undertake a credit check. They will use the information held by a credit reference agency to determine whether they are prepared to lend to you.
The information that a lender obtains from a credit reference agency includes:
- Your address history
- Whether you are on the electoral register at your address
- What other borrowing you have, such as loans or credit cards
- How you have managed your other borrowing i.e. whether you have paid any loans or credit cards on time
- Whether you have missed any payments or made any payments late
- Whether you have any County Court Judgements or defaults.
Finding out you have an issue on your credit record can delay your mortgage application, potentially costing you the property you want to buy.
So, before you even start searching for a new home, apply for a credit report from one of the three credit reference agencies in the UK: Experian, Equifax and Callcredit.
This report will show you whether there are any issues on your credit file that may harm your chances of applying for a mortgage. If there are errors on your credit file you have time to get these corrected. In addition, if you know what your file contains, you can take steps to improve your credit record – for example, you may be able to get yourself on the electoral register.
2. Get your documents ready
Vendors like to know that you can move quickly once your offer is accepted. So, another way you can put yourself in a great position when you’re ready to make an offer is to have all your documents ready and prepared.
Whichever lender you are using, they will need to see supporting evidence to accompany your application. Having all these documents available will speed up the process and help you to obtain your mortgage offer more quickly:
- Identification including your passport and driving licence
- Proof of your address, such as utility bills dated within the last three months
- Your last three payslips
- Your most recent P60 to show any additional income, such as commission or bonuses
- Your SA302 form and three years’ accounts if you are self-employed (or as many full accounts as you have)
- Bank statements for the last six months, for all accounts
- Proof of any other income you receive, such as pension or investment income.
3. Get an agreement in principle
When you want to buy a property, it can really improve your chances of success if the vendor or estate agent knows that you are in a position to move quickly. So, obtaining a mortgage agreement in principle can really help you.
Approaching a lender to get an agreement in principle means:
- They will have accessed your credit file to ensure there are no issues
- They will have undertaken an affordability assessment to ensure you can afford the mortgage
- They will have underwritten your application to ensure you have met all the lender’s criteria.
By showing a vendor or the agent your agreement in principle you can prove that your finance is in place. This gives the seller the reassurance that there won’t be significant delays and that you can obtain your formal mortgage offer and exchange contracts quickly.
