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Purchasing a property in the UK
with a Mortgage or Cash
Independent Surveyors solve problems
If you need help or advice with regard to your property
Free phone 0800 298 5424
We are Independent Surveyors who regularly carry out Building Surveys sometimes known as Structural Surveys, Valuations, Specific Defect Reports etc.
We are happy to talk about any property matter whatsoever. Please feel free to phone for a friendly chat. This is just a reminder about our Free phone 0800 298 5424 number. Here is some more information about purchasing a property in the United Kingdom with a mortgage or cash.
We are often asked to know a bit more about the valuation system and how it works and how banks / building societies / lending institutes lend money on property. Here is some information regarding this matter but we do wish to add that entire books have been written on this subject, not to mention the Royal Institution of Chartered Surveyors (RICS) having of course many years of experience. The overriding factor with valuation we would say is that it is a matter of opinion rather than fact and some opinions are more important that others!
The vast majority of people in the United Kingdom purchase property with a mortgage and as such this is provided by a bank / building society or other lending institute. A mortgage allows an individual/individuals to purchase a property with a relatively small deposit (ten to thirty percent) providing they have proof that they have the ability to provide a regular income and therefore a regular payment to the mortgage company for the next twent / twenty five or thirty years.
There are various limits involved in gaining a mortgage but this is an outline of the scenario.
As such any property that you purchase that you wish to sell at some point in time or refinance for a mortgage needs to be mortageable and passed by a bank / building society/lending institute / and their panel Surveyor. The criteria for the panel Surveyor, who really should be called a Valuer, varies and we would argue strongly that they do not necessarily reflect what the market would pay for the property and there is certainly differences and inconsistencies between different banks / building societies / lending institutes in our experience. However the main benefit that must be emphasised is the gearing.
What we mean by gearing is if something is worth £100 the mortgage lender will allow you to purchase it with a deposit of £10 to £30 and the remainder being paid in monthly instalments. These monthly instalments attract a relatively small interest rate and as such are one of the best ways to borrow money; with this being the normal way in which to purchase a property in the UK . This therefore gears the deposition amount upwards to allow you to purchase something much larger.
There is an argument that you should never purchase in cash as this has no gearing and is not the best use of your money.
Buying in cash has its advantages
Buying in cash has its advantages as it does allow you to purchase properties that mortgage lenders would not lend. If then you know what you are doing you can then refurbish the property as well as extending and altering it to allow the property be then become mortgageable.
This will then add value because as explained earlier the vast majority of people can then place a small deposit and borrow against their earnings in order to purchase the property with a mortgage.
What buying with cash does not do is expose you to the strange world of bank/building society/lending institutes lending
The bank/building society/lending institutes criteria's can exclude you or add a retention to the property.
Typical example of retention would be:-
1. where the dampness in a property or
2. woodworm or
3. other such issues
Typical examples of where a bank/building society/lending institute would decide not to lend on a property is where:-
1. alterations have been carried out without permission or
2. there is no Fire Exit in a flat
3. the number of years in a lease is less than thirty
4. there is a defect on the title of what is being purchased.
Mortgage Valuers - bank / building society / lending institute and their panel surveyor
All of the above value to the mortgage lenders criteria which although there are guidelines set out by the Royal Institution of Chartered Surveyors (RICS) mortgage lenders can have criteria over and above this. We therefore move into a hypothetical world where value of a property is something to a company that would lend a mortgage against the property and is not necessarily the worth it has to an individual however you have to make a judgement on this.
Knowing the cost of everything but the value of nothing
This saying very much emphasises what happens in the property sector with the cost of land and the cost of a building not equalling the actual value of a property. Equally the cost of repairing a property which perhaps has been badly damaged by fire or that has been repossessed added to the purchase value does not necessarily equal the final market mortgageable value.
These need careful consideration by a Surveyor or Valuer that understands and knows the property market.
Tell me a bit more about worth?
How much is a property worth to you can be completely different to how much a property is valued at by a mortgage lender or panel Surveyor.
A very simple equation would be a flat that is in poor condition that is refurbished may not be mortgageable because there is not a proper Fire Exit but nevertheless you can achieve £700 per month and therefore £8,400 per annum less maintenance and other costs of say £7,000. If this property is on the market at £70,000 but has to be a cash purchase that means you would get your money back in ten years but the most important matter is how much could you money make elsewhere? £70,000 in the bank in a low interest environment may make more if it is invested in the flat property scenario, however in a high interest market in may make less.
As an investor it is your choice where to put your money.
If you truly do want an independent expert opinion from a Surveyor with regard to valuations, mortgages, mortgage companies, surveys, building surveys, structural reports/engineers reports, specific defects report, structural surveys, home buyers reports or any other property matters please contact 0800 298 5424 for a surveyor to give you a call back.
You may also be interested in these other articles:
If you have a commercial property, whether it is freehold or leasehold then sooner or later you may get involved with dilapidation claims. You may wish to look at our Dilapidations Website at www.DilapsHelp.com and for Disputes go to our Disputes Help site www.DisputesHelp.com .
We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).
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