# Buying a house for cash



## vic12 (25 Dec 2010)

Hi everyone,

With house prices coming down, I have enough savings now to buy a house for cash. Considering the situation with Irish banks, I think it could be a good option.

I am a first time buyer, so I do not have experience in buying a property. 

Looking for advice of what key points to be aware of when buying for cash. I understand that the procedure could be different from buying with mortgage.

Thanks.


----------



## Brendan Burgess (26 Dec 2010)

Hi vic

A very interesting question.

Not sure that there is that much different to buying with cash and buying with a mortgage. The usual advice applies. Get the house surveyed. Shop around. Make sure it suits your needs. etc. 

Here are some differences. 

It's quite expensive to trade up. So if this is not your house for life, you could consider buying a more suitable house. If you have been saving a lot, it means that you can afford a mortgage. Don't be frightened of a small mortgage. 

In general, it's a good strategy to use your cash to buy a house and to borrow as little as possible. It's not a good idea to have cash on deposit at 2% while borrowing at 4%. However,  it's very hard to get loans these days. If you use up all your cash on  the house and you need money at some future stage to start a business,  it might be difficult to get it. If you are a big saver, that probably  won't be a problem as you will be able to accumulate new savings over  the next few years. But if you might need cash, you might consider a  small mortgage and keep cash in reserve. You can pay off the mortgage any time you like. 

The fact that you have cash should put you in a powerful buying position. The decision to buy is yours. There will be no delay in waiting for loan approval. You should use this to drive a better bargain.

The work for your solicitor will be a lot less. They might reflect this in the fee. 

On conclusion of the sale, there will be a set of deeds which usually go into the lender's safe. You will need to decide what to do with them. You could ask the solicitor to keep them for you.


----------



## dewdrop (26 Dec 2010)

As is said "location, location, location". When we first started looking for a house we fell in love with numerous locations but when we look back we were  really crazy to consider these houses.  Never thought of children coming along and the resultant travel etc.  Likewise later in life i had contact with young couples thinking of buying and again like myself in the past some of their plans really would not work out in the long term. So my advice is to think long and hard, do as much research as you can, visit the location say at night, imagine your other half alone in the house say if you were working away.  I hope i dont appear too negative but it is one of the most important decisions you will have to take.


----------



## vic12 (26 Dec 2010)

Brendan, dewdrop, thank you for your sound advice

Banks are my biggest worry at the moment. Well, I imagine it is everyone’s worry. I read a lot on this forum on banks’ and Euro’s possible future and government’s actions.

What will happen if I sign a contract and then will not be able to come up with cash for the reasons beyond my control, for instance, because later the government places restrictions on money withdrawal and cash is locked up in my account?


----------



## Complainer (26 Dec 2010)

I wonder if there is a higher risk of over-paying if buying for cash?

I hear that the banks are being fairly strict on valuations these days. [Pity they didn't do this for the past 10 years]. This stops most people from over-paying, as they are dependant on the valuation by the bank's surveyor. Would there be a danger of over-paying without this control?


----------



## Brendan Burgess (26 Dec 2010)

vic12 said:


> What will happen if I sign a contract and then will not be able to come up with cash for the reasons beyond my control, for instance, because later the government places restrictions on money withdrawal and cash is locked up in my account?



This is very unlikely to happen, but even less likely in the short time between signing a contract and closing. 

You can reduce this very small risk further, by specifying a very short time from signing the contract to closing. 

You are probably more likely to get killed crossing the road during the period between signing the contract and closing. You can't abolish all risk.

Brendan


----------



## dewdrop (26 Dec 2010)

Just another thought as you are not looking for a mortgage you will not be obliged to take out Life Insurance cover. However it may be an opportune time to consider, if not already done, your Life Insurance situation.


----------



## corkmike (26 Dec 2010)

Hi,
One option if you want to keep your savings is to look at an offset mortgage i.e. if you have 300 k in savings and are buying a house worth 350k, pay 200k in cash, get a mortgage of 150k and then use the 100 k to offset it against the interest on the 100k. This still eaves you access to your savings and reduces your mortgage interest. NIB offers one.
Also the chances of your money being gobbled up or held up is unlikely as it would cause a disaster for the state that they would not be able to fix. You seem to be more fearful of your moneys safety and that is your motivation to buy a house. If you really don't want to but a house then don't get some advice, diversify your money and wait until you really want to buy a house.
Regards
Mike


----------



## Brendan Burgess (27 Dec 2010)

corkmike said:


> Hi,
> One option if you want to keep your savings is to look at an offset mortgage i.e. if you have 300 k in savings and are buying a house worth 350k, pay 200k in cash, get a mortgage of 150k and then use the 100 k to offset it against the interest on the 100k. This still eaves you access to your savings and reduces your mortgage interest. NIB offers one.



Great idea Mike. I had assumed that they were no longer offered - it's good to see [broken link removed] The [broken link removed]is currently around 0.5% higher than the lowest LTV rate, but that shouldn't matter too much.

In your example 


Mortgage|150k
Savings|€100k
Net mortgage|€50k
Interest at 3.71%|€1,855Compared to €50k@3.2% = €1,600

So it costs €250 a year to keep €100k available. 

That is probably worth it. 

Brendan


----------



## croker (8 Jan 2011)

Someone mentioned earlier about getting a small mortgage. Just to point out, the last time i checked, the banks will only give >50% LTV mortgages. So if you have cash for most of the value of the house , let's say 75%, and want a mortgage for the remaining 25%, you probably wont be able to get it.


----------



## Vanilla (8 Jan 2011)

There is very little extra work for a solicitor when a mortgage is involved, the main difference would be less PRAI costs.


----------



## Greta (8 Jan 2011)

croker said:


> Someone mentioned earlier about getting a small mortgage. Just to point out, the last time i checked, the banks will only give >50% LTV mortgages. So if you have cash for most of the value of the house , let's say 75%, and want a mortgage for the remaining 25%, you probably wont be able to get it.



If a buyer needs only a small amount to borrow compared to the purchase price, it may be possible to borrow it as a personal loan and pay it off over just a few years. OK, interest rate will be higher than with a mortgage, but at least it will be possible to buy a better house and the loan will be gone in a few years.


----------



## corkmike (8 Jan 2011)

One must remember that one would go for a larger loan to get a mortgage  and then offset it with savings later on or pay off a chunk of it. Getting a  personal loan with a higher interest rate would not be as good an idea  given rates can be very high, some rates by the main banks can be as  high as 13%. At the end of the day the savings made with a solicitor by  not getting a mortgage would be easily saved over the term of the  mortgage. Also solicitors are quiet reasonably priced now as business is  not as good as the good old days.
One must also realise from a banks perspective you are the ideal  customer as in todays climate they have very little risk and a nice  little loan on their books for a number of years.
Regards
Mike


----------



## noel_c (9 Jan 2011)

croker said:


> Someone mentioned earlier about getting a small mortgage. Just to point out, the last time i checked, the banks will only give >50% LTV mortgages. So if you have cash for most of the value of the house , let's say 75%, and want a mortgage for the remaining 25%, you probably wont be able to get it.


I'm pretty sure that this isn't true. Can you point to a source? If anything I believe that <50% LTV will get you a better rate with those Irish banks that are actually lending - they want low LTV, not high LTV.


----------



## noel_c (9 Jan 2011)

A quick look at the online FTB rates for BOI give

> Variable VRP1 (LTV < 50%) 3.0%

Of course the reality of mortgage lending is quite different from what banks are publicly saying so I'm open to correction here.


----------

