Mortgage before or after buying house?

[sunnyday2025]

I’ve seen a house I love. Initially my priority was to be mortgage free after coming out of a 25 year marriage but realistically I will need a small mortgage if I don’t want to be completely cleared out financially.

my question is do I use all my cash upfront and then take out a mortgage after completion or should I take the mortgage beforehand?

The house has had loads of interest and I’m inclined to think my offer is more likely to be accepted if I buy cash.
Are there any implications in taking a mortgage out post completion?

Surely it would be you remortgaging if you try to get money afterwards., I think the sensible thing is to take out a small mortgage. Not spend all your money on the house and have nothing to live on.

Why do you feel you need to have cash?
Only borrow money Only if you really need to spend it. Interest rates are pretty high.

Can you afford all fees, moving costs? Without borrowing?

Do you work? How old are you?

Sorry yes it would be remortgaging if I took one out post completion. Not sure if it would make any difference?

I can just about afford it outright with costs but I would have nothing left over which I absolutely don’t want. Financially security is my priority. I have a secure job but don’t earn a huge amount

I am 54

What would your monthly payments be on a mortgage? You say to borrow a ‘small’ amount. So taking £40,000 as an example and assuming you look to repay the mortgage by 67, that’s roughly £330 a month. Personally I’d prefer to be £300+ a month better off.

whatever you borrow, you’re going to have to pay back over the next decade or 2 of your life. Plus a whack of interest (£12k if the calculator I used is correct). In your shoes I’d be really trying to manage without.

but that wasn’t your question! My answer to your actual question is that I would do it after purchase, but to try living without the borrowing first and only mortgaging if absolutely necessary.

You need to check a few things before making a decision. It sounds like you could afford to buy the house outright, so assuming this is the case, I think you should look into:

1. If you get a mortgage to buy, how long a term would the lender stipulate?
2. What would the interest rate be?
3. If you purchase outright, and then get a loan, it may be a homeowner loan as opposed to a mortgage, and have a different rate of interest which may, or may not, be more favourable.

Also, check to whole life cost. Sometimes it is better to get a higher interest loan for a shorter period as you will pay less overall, however this depends on whether you want the cash monthly.

Also, in any scenario above, the lender will want to know how you intend to repay, and their criteria are much more stringent than they used to be.

Assuming you have considered all costs (stamp duty, moving, setting up and closing down utilities etc) and can definitely cover them all, AND you are confident that you have the income and job security to easily get a remortgage (I'd want to speak to a mortgage advisor about this to check, I've heard that it can be difficult to get mortgages for values that are deemed "too small" to be worth the while of the lender), I would take out an interest free credit card on as long as term as possible, pay cash, rebuild savings with the money you'd otherwise be paying towards the mortgage. Then you have the credit card as the source of emergency money if required. The credit card will give you interest free breathing room if you end up later deciding you actually need to remortgage

If it’s had loads of interest I’d go for a cash purchase. If you want to make even more sure and are confident you can pick up any potential problems with the property don’t bother with a survey either. And if you know the area really, really well not bother with the searches either. It’ll make you a much more attractive purchaser.

I’d work out what the potential mortgage payments would be then figure out if it’s worth having that amount spare each month that can be put back in savings?

Say you take out a mortgage that costs you £400 a month but keep £20k in savings, you’ll pay interest on the mortgage even though you have savings too.

If you buy outright, you’d have £400 a month to put back into savings so you could build them back up so still have financial security.

I don’t think remortgaging just to have money in savings is a good idea, but you have the option if you need cash for something specific.

Obviously made up figures because I don’t know what you’re defining a small mortgage as.

Go as a cash buyer, much more attractive to the seller and as a buyer it'll be easier, less paperwork etc. You can always take out a personal loan afterwards if you need more cash or an interest free credit card. Mortgages often have fees/valuations attached so don't just look at the headline rate when comparing to a personal loan. As someone else said you may also struggle getting a mortgage for a small amount.

It's not clear whether you have enough cash to buy the new house outright? If not, the sale won't complete anyway. If you're buying outright with cash, would the bank allow you to remortgage a property that you've never had a mortgage on? I think you need to be sure of that before proceeding.

I think you can’t remortgage for 6 months after buying if that makes a difference. Personally I wouldn’t take on a mortgage if I didn’t have to.

I would take out a small mortgage to buy the house, it's more straightforward.

You will still be seen as a good buyer if you don't have to sell a property in order to buy this one.

Cash purchases also cut down on the time to completion, and that can be an important factor to make you stand out for a property that's got lots of interest. Like others have said, if that money you're thinking of using to be mortgage free is just going to sit as savings, then go mortgage free. You can then build your savings after buying a house outright and not be paying mortgages and fees. Personal or short term secured loans or credit cards are a much easier way of accessing a small pot of cash for, say, any refurbish work you want to do. But get proper financial advise if money will actually be tight for everyday essentials - that's where you might need to consider a mortgage.

I would be a mortgage free buyer as you might be able to make a slightly lower offer in that position.

I would then work out if I really needed the extra cash straightaway. If it is to help you make the house feel more like a home, I would say live in it for a bit and save. Say you would be saving 400 a month by not having a mortgage that would quickly add up to allow you more financial freedom within a few months than if you borrow the cash but have to pay it back plus interest.

That said if the new house needs urgent repairs to make it liveable that is different.

The lender will also want to know what the money is for is you are capital raising against the property- and they might not like "to have some money".
If you buy for cash and don't have a loan to repay can you start re-building your savings immediately after completion? That would be the easiest and cheapest way to do things.
Alternatively applying for a small mortgage to buy won't slow things down I
wouldn't have thought.

If you were to buy outright for cash you might be able to get a lower offer accepted.

However, if you struggle to find a mortgage after completion would you be struggling for bills etc while you sort it out. If so, be cautious about using all your cash up just in case an unexpected Liz truss fiscal event trashes the mortgage market while you sort yourself out