Steps for Buying a house without a mortgage in the UK

By HuutiMoney
Page last updated: 15/09/2022 | Next review date: 15/09/2024
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There are several ways to buy a house without a mortgage in the Uk. They include:

  1. Using seller financing
  2. Paying with cash
  3. Using an investment
  4. Live frugally as a couple

Mortgages are certainly the easiest way to buy a house in the Uk but there are some alternatives which could allow you to buy a house without a mortgage in the UK but these alternatives need to be considered carefully as they may not be for everybody.

Seller financing:

Seller financing is one of the most common ways and may even be the best way to buy a house in the Uk without a mortgage.

Seller financing usually involves you and the seller of the property coming to an agreement on the home purchase.

You will usually pay them some money down as a down payment and then pay them a monthly amount almost as if you had a mortgage.

This option is very good for people who have bad credit scores and can’t get a bad credit mortgage but may be able to prove to a home seller who isn’t too bothered about getting cash upfront that they can make the repayments on time.

Due to the risk with this arrangement, you may want to seek legal advice as buying a home without a mortgage in this manner could leave you homeless and out of pocket if disagreements occur in the future and you don’t have a strong agreement with the seller in writing.

Paying with cash:

Paying with cash is obviously the simplest way to buy a house without a mortgage in the UK.

The issue here is that for most people that just simply isn’t possible as house prices continue to rise in the UK.

You may need to spend at least £100,000 in cash for you to be able to purchase your home and worse of all you may not be eligible for most of the government schemes below based on the type of home you buy( New build or not) and if the government are aware you can afford to buy your home in cash.

They may simply refuse you for any of the government schemes below as you could also use that money towards a mortgage deposit.

Some of the government schemes you may be ineligible for by using cash include:

  • Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
  • Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
  • Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
  • Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
  • Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
  • Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
  • Right to buy- allows you to buy your home at a discount price.
  • Preserved right to buy– same as above.
  • Right to acquire- same as above.

Using an investment:

You could use an investment from an investor as a way to purchase a home without a mortgage in the UK.

This will work by the investor offering you the cash upfront in return for a fixed rental amount or a share of the proceeds when you sell the house.

There are various tech startups which are working on propositions similar to this and this may be a good way to buy a house in the Uk without a mortgage.

Live frugally as a couple

This method involves you and your partner living frugally on one person’s wages and then saving every penny of the other person’s wage towards the cost of a home.

It may take 2 to 3 years but it is very possible and various UK couples have used this same way to buy their home in the Uk although most of them used it to save up for a mortgage deposit.

As you can imagine saving £300k for a home on a £60k salary will take 7 years and 7 years of stringent saving when considering income tax.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.