Tatler Experts’ Corner: I Can Afford To Buy a High-Value Property In Cash
11th November 2021
Why can a mortgage be a better option?
As part of Tatler SOS Experts’ Corner, Islay Robinson of Enness Global Mortgages explores the benefits of using a mortgage rather than cash to purchase a high-value property.
When you have substantial liquidity and want to buy a luxury property, paying in cash can seem like the most straightforward option. However, a mortgage can offer greater flexibility and potentially provide long-term financial advantages.
One of the main considerations is opportunity cost. Using a large amount of capital to purchase a property outright means that money is no longer available for other investments, business opportunities or personal objectives. While high-value property can be a strong long-term investment, retaining liquidity can allow buyers to pursue other opportunities while still securing the property they want.
A mortgage can therefore provide greater financial freedom. Rather than choosing between purchasing a property or retaining capital for other purposes, buyers may be able to do both.
The cost of borrowing is another important consideration. For borrowers with strong financial profiles, high levels of liquidity and significant assets, lenders may be able to offer highly competitive rates. Depending on the individual circumstances and structure of the transaction, borrowing can be an efficient way to finance a high-value property purchase.
There can also be tax and international financial considerations. For example, when purchasing property overseas, the way a transaction is financed can affect how certain assets are treated for tax purposes. Buyers should always seek appropriate tax and legal advice, but a mortgage may offer advantages compared with purchasing a property entirely in cash.
International buyers may also wish to consider foreign exchange costs. Moving substantial amounts of capital between currencies can result in significant fees and exposure to exchange rate movements. Financing part of a purchase through a mortgage may reduce the amount of capital that needs to be transferred at one time.
For high-net-worth individuals, a mortgage does not necessarily need to resemble a traditional long-term home loan. Facilities can often be structured around the client's wider financial position and objectives, with options including longer fixed terms, high loan-to-value lending, interest-only structures, international property finance and flexibility around repayment.
While mortgages are often viewed as complex, the process can be considerably more straightforward for clients with substantial liquidity and a strong financial profile. Working with an experienced mortgage broker can also help identify suitable lenders and structure a facility around the buyer's specific requirements.
Ultimately, paying in cash is not always the most financially efficient way to purchase a high-value property. A mortgage can help preserve liquidity, support wider investment strategies and provide greater flexibility over how capital is deployed.
