An online mortgage broker has launched a service offering first-time buyers the chance to become cash buyers, potentially enabling them to negotiate lower house prices.
'Habito Go' offers the chance of a cash loan while you wait for your mortgage application to be processed - but the service is pricey and, arguably, pretty risky.
Here, we explain how Habito Go works and offer advice on which types of buyer could benefit.
The argument is that sellers find cash buyers more appealing, as there's less chance that the sale will fall through due to mortgage complications, and it can also speed up the process.
But how does it work in practice?
Habito Go is available to first-time buyers aged 25-55 who earn at least £30,000 a year.
Buyers with a 20% deposit can borrow up to £750,000, and for those with a 15% deposit the maximum is £500,000.*
Land Registry data shows that around 30-40% of homes are bought without mortgages - and in some cases, cash buyers can make big savings.
And the broker claims that the prospect of lower prices isn't the only benefit of being a cash buyer.
According to Habito, transactions progress more quickly for cash buyers, and not having to wait for a mortgage to go through can give you the upper hand in a competitive market.
Habito charges a hefty-sounding fee of 1.95% of the property's purchase price, which would work out at £4,875 if you were buying a home for £250,000.*
This is significantly more expensive than the up-front costs involved with getting a standard mortgage. However, Habito claims the fee is justified, as it covers up-front costs such as valuation surveys and property searches as well as the 'cash buyer' status.
But Habito says the fee is clear and reasonable, and emphasises that it will only offer loans to borrowers who it is convinced will comfortably obtain a mortgage in good time.
While there are certainly some positives to Habito Go, it's not going to be the right product for everyone.
First of all, if you don't have a deposit of at least 15%, you won't be eligible.
If you do have the funds, you'll need to do your research on the local market and ask yourself these questions:
If you're able to save a sufficient deposit, it's a great time to be a first-time buyer, with mortgage rates at some of the lowest levels we've ever seen.
If you've got a 15% deposit and are applying for an 85% mortgage, there are two-year fixed-rate deals at 1.5-1.6%, and five-year fixes at around 1.8-1.9%.
And rates are continuing to tumble for those with smaller deposits, too. With a 10% deposit, you could obtain a two-year fix at around 1.7-1.8%, or a five-year fix at 2.2-2.3%.
Market-leading deals tend to come with fees of around £1,000-£1,500, so you'll need to factor these costs into your calculations.
Habito is just one of many mortgage brokers, all of whom will survey the market to find you a suitable home loan.
One of the main benefits of using a broker is that they can access deals that aren't available directly to consumers. Which? analysis of data from Moneyfacts shows that more than a third of deals currently on the market are only available through brokers.
A good broker should offer a whole-of-market service (meaning they can look at deals from all lenders), and should inform you if the best mortgage is only available if you apply directly to the lender yourself.
Note: This article was updated to reflect that *£750,000 and £500,000 are the maximum loan values, rather than the maximum property values and **the 1.95% fee is based on the final agreed purchase price, not the mortgage amount.