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Buying a House Without a Mortgage and bank not involved

Buying a house without a mortgage

(Last Updated: 09/02/2024)
6 min read

Can I buy a house without mortgage?

There are various ways of buying a house without a mortgage, such as:

  • Buying with cash.
  • A gift from parents.
  • A private loan from friends or family.
  • A director loan from your company.
  • Gradual home ownership (similar to shared ownership).

Being a cash buyer is the simplest because you use your own money. Additional costs and risks arise when sourcing finance from a private lender or an affordable purchase scheme. We explain each scenario step by step.

Why would you buy a house without a mortgage?

For some buyers, buying with a mortgage is not an option because:

How to buy a house without a mortgage

  • 1

    Buying with cash

You are known as a cash buyer who can buy with someone else or on your own. The conveyancing process is simplified as you don't need to get a mortgage offer, but you do need to prove the source of your cash.

How do I show proof of funds to buy a house with cash? Your solicitor requires you to prove the source of the money you are using to buy the property. This normally comprises 6-12 months' bank statements and supporting evidence of where the money came from.

Can I use cash as proof of funds? While the word cash is used, you cannot use physical cash or Cryptocurrency to buy a house in England or Wales. Read more - How to prove source of funds.

Can I use a gift without a mortgage? You can use a gift from your parents. Another family member would rarely gift a large sum of money without expecting it to be repaid. Even though you're buying without a mortgage, your solicitor needs your parents to sign a Gifted Deposit Letter. Download a Gifted Deposit Letter.

What happens when you don't have a mortgage?

When buying a house without a mortgage, you can skip parts of the conveyancing process that, if you were getting a mortgage, you couldn't. These include:

  • Conveyancing searches.
  • RICS survey.
  • Mandatory mortgage legal enquiries.

It is not advisable because when you come to sell the property, if you sell to a buyer with a mortgage, you may find you can't sell because of an issue that could have been flagged within the above checks. At SAM Conveyancing, our rule is, if a mortgage lender wouldn't do it, why should a cash buyer?

  • 2

    A private loan from friends or family

Buying with a private loan means you don't have a mortgage, but you owe money to someone. The process requires:

  • Proof of ID
  • Source of funds
  • Loan Agreement

You'll need a loan agreement to formalise the term, interest and other clauses around how the loan is to be repaid. Read more - How to draft a loan agreement when buying a house?

  • 3

    A director loan from your company

You can withdraw a company loan as a director. If over £10,000, you need a board meeting to approve the withdrawal.

The director's loan must be repaid within 9 months and 1 day of the financial year end, or else tax is payable. If the loan is not repaid in that time, the company will have to pay 33.75% of the balance outstanding along with the Corporation Tax charge for that year.

  • 4

    Gradual home ownership

A gradual home ownership scheme allows you to buy a house with a company, and over time, you can buy more shares. Your deposit starts from 5%, and you pay rent on the part you don't own, so it is similar to a mortgage; you still have to pay.

The companies offering this type of home buying without a mortgage are Wayhome and Heylo Housing.

What are the risks of gradual home ownership? Whilst they are mortgage free, this doesn't mean they are free to use. The companies charge for the rent, and you may lose your home if you have financial difficulties. You must read the terms and conditions very carefully..

Frequently Asked Questions
Andrew Boast of Sam Conveyancing
Written by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh Bailey, Digital Marketing Manager
Reviewed by:

Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.

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