Buying a house without a mortgage: what are your options?

Bank interest rates have broken historic lows in recent months. However, the increasing demands of banks and the expenses associated with mortgage loans are pushing more and more buyers to consider the possibility of buying a house without a mortgage.

This option has significant advantages. On the one hand, we avoid commissions and expenses associated with bank financing. On the other, it's a time-saver, as we won't need to carry out all the necessary procedures to obtain and sign the mortgage. And, finally, it is easier to negotiate conditions with the seller and make a profit.

The alternatives to home loans to buy a home without a mortgage can be very different. Choosing one or the other will depend, to a large extent, on the liquidity available at the time of purchase.

Options to buy a home without a mortgage

1. Rent to buy

The choice to buy a home without a mortgage is more and more frequent. It consists of paying an amount in rent for a time agreed with the owner. After this period, the tenant has the right to purchase the home at a previously stipulated price. From this agreed price, the amounts paid up to that moment would get discounted - totally or partially. It means that the rental payment works as an 'advance' of the purchase amount (if the operation gets through).

It should be pointed out that the tenant can exercise his right to purchase or withdraw from it when the time comes. However, in this case, the tenant may not recover the amounts contributed.

For example, renting to buy is interesting when we expect to obtain the necessary capital for property purchase, but we need time. This period is not usually as high as for a mortgage loan, but between 2 and 5 years, although there is no legal limit as such.

2. An agreement to defer payments with the landlord

In this case, the homeowner acts as the lender. It is essential to establish the final price, the number of terms in which the payment will be satisfied, and the amounts, in the purchase agreement.

Besides, the agreement may include guarantees that allow the owner to recover the home in the event of default by the buyer. In that case, the buyer would recover the money contributed to date, subtracting a previously agreed penalty.

3. Invest the savings

It is the first alternative when you enjoy a healthy financial situation and sufficient savings to buy a house without a mortgage. Savings from lottery prizes, inheritances, incentive pays, or an appreciation of other investments can get liquidated to obtain the necessary funds for home purchasing.

It is also the fastest way to acquire a home because there is no need to reach prior agreements with the owners or financial entities.

It is an attractive option when it comes to acquiring a house for habitual residence, but also if we consider it as an investment. Having immediate liquidity allows you to take advantage of good opportunities and purchase a second residence or a property to rent from which you can obtain profitability.

4. Count on family help

Sometimes the lender is neither the bank nor the owner of the property, but a relative. In this case, a fundamental question must receive an answer: whether or not the beneficiary has to return the money received.

If it is not necessary to return it, it is considered a donation and would be subject to the payment of taxes. If we have to return it, it would be a loan and, as such, a contract would have to be signed establishing the conditions.

5. Crowdfunding

The formula for raising funds among various interested parties in a project also applies in the real estate sector. Main advantage? The required outlay of each interested party is lower, which makes it easier to buy a house without a mortgage. If you dare to use new technologies to find partners when buying a home, it may be an attractive option.

Whichever way you choose to buy your house or finance it, Spainhouses helps you make your dreams come true. Just enter your preferences in our browser, and choose from the best real estate offer you can imagine. Don't wait more time to enjoy your new home.