Best way to purchase a home without a mortgage?
April 27, 2023 5:06 AM Subscribe
Let's say I have a large amount of money, but not quite large enough to buy the kind of home that I want in cash, as it would wipe out my savings. With a mortgage, that home would easily be in my price range; but I'm looking to leave my job in the very near future to start a sole proprietorship, and I don't expect to be making any income in the next few years. (And nobody will give me a mortgage without a job, right?) Can I somehow leverage my money to make monthly payments on a home without it being a mortgage? I realize one obvious option is "keep your job until you find a home," but assume that's not a possibility in this scenario.
it’s going to be a pain to find a seller who will agree but you can enter into a payment plan directly with the seller of the house. for google purposes it’s called seller financing
posted by dis_integration at 6:14 AM on April 27, 2023 [1 favorite]
posted by dis_integration at 6:14 AM on April 27, 2023 [1 favorite]
I agree with Dip Flash - get a mortgage now, pay the normal down payment amount, and normal monthly payment, then when you are ready to quit, enact your plan to either nearly pay the house off or make a large payment, but one that still leaves you enough cushion.
posted by The_Vegetables at 7:21 AM on April 27, 2023 [2 favorites]
posted by The_Vegetables at 7:21 AM on April 27, 2023 [2 favorites]
Seconding what Dip Flash said, which we sort of did by accident.
We sold a home, then rolled the proceeds into a new home. That way our mortgage was just one-third of the home's cost. Then we both lost our jobs in the 2008 recession. But because the monthly payment was relatively small, we were able to make the payments out of savings and some freelance income until we landed real jobs. Then we refinanced and cut the mortgage payment down even more, allowing us to stay in the jobs we like, even though the pay is sub-optimal. And we lined up a home equity line of credit, giving us another resource in case we need it (lose jobs, want to buy a small island, etc.)
posted by martin q blank at 7:23 AM on April 27, 2023 [2 favorites]
We sold a home, then rolled the proceeds into a new home. That way our mortgage was just one-third of the home's cost. Then we both lost our jobs in the 2008 recession. But because the monthly payment was relatively small, we were able to make the payments out of savings and some freelance income until we landed real jobs. Then we refinanced and cut the mortgage payment down even more, allowing us to stay in the jobs we like, even though the pay is sub-optimal. And we lined up a home equity line of credit, giving us another resource in case we need it (lose jobs, want to buy a small island, etc.)
posted by martin q blank at 7:23 AM on April 27, 2023 [2 favorites]
I'd probably recommend renting in this scenario - unfortunately. Renting is basically paying monthly on a mortgage without having the income requirements.
However, there are plenty of mortgages that don't require income - called a no-doc mortgage. The rates are much worse (2% higher or so in my experience) and given your situation I would still recommend renting - but it's a possibility.
posted by bbqturtle at 8:01 AM on April 27, 2023
However, there are plenty of mortgages that don't require income - called a no-doc mortgage. The rates are much worse (2% higher or so in my experience) and given your situation I would still recommend renting - but it's a possibility.
posted by bbqturtle at 8:01 AM on April 27, 2023
With a large enough down payment and cash reserves you can totally get a mortgage without a job. Mortgage brokers do it every day of the week.
posted by MattD at 8:29 AM on April 27, 2023 [1 favorite]
posted by MattD at 8:29 AM on April 27, 2023 [1 favorite]
Seller-financed homes are a thing; it's basically rent-to-own. I work with a company that is doing this, but it's not in all states yet. Happy to talk via MeMail.
posted by Mchelly at 8:46 AM on April 27, 2023
posted by Mchelly at 8:46 AM on April 27, 2023
Agree with MattD. This is not the most common way of getting a mortgage but brokers will know which lenders will do it. Lending someone $100k to buy a $500k house is obviously pretty low risk, especially if you have the $100k sitting there in cash anyway. At that LTV, your income doesn't really matter, they will look at your assets and your liabilities instead.
posted by atrazine at 9:22 AM on April 27, 2023
posted by atrazine at 9:22 AM on April 27, 2023
Either buy now while you still have job, or...
This is how I ended up buying a house with a loose acquaintance. They didn't have quite as much money as you, but they had a decent deposit and were unemployed, I had a job and not enough deposit (in a market where house prices were rising as fast or faster than two people could save, let alone one).
Your cobuyer would have to be trustworthy, and there's various legal agreements necessary for co-ownership, what if one person needs to sell out etc.
But if you were thinking about housemates already, then you're just locking that in.
If you weren't, you might find someone who would like to get on the property ladder, and be able to sell out to you in a few years, and buy something else.
Long term, that's what my cobuyer is planning on, as the house isn't well situated for them, while I'm fine with it being my 'forever home'.
This absolutely depends on your country or region, but -
It is so worth it not renting for me, I had nearly 20 years of renting or flatting, and stable landlords who won't sell or decide to renovate etc have been hard to find, so having to move every couple of years is stressful, and the cost of rent here is always at least that of a mortgage, and after a few years, the mortgage is usually much cheaper as rent prices keep going up. *And* you get the house at the end of it. It's been really good having that stability for the last few years even when I lost my job and had to get a new one. I still have housemates, so it's kind of like I'm still renting, I just have a very absent landlord called 'the bank'.
posted by Elysum at 3:05 PM on April 27, 2023
This is how I ended up buying a house with a loose acquaintance. They didn't have quite as much money as you, but they had a decent deposit and were unemployed, I had a job and not enough deposit (in a market where house prices were rising as fast or faster than two people could save, let alone one).
Your cobuyer would have to be trustworthy, and there's various legal agreements necessary for co-ownership, what if one person needs to sell out etc.
But if you were thinking about housemates already, then you're just locking that in.
If you weren't, you might find someone who would like to get on the property ladder, and be able to sell out to you in a few years, and buy something else.
Long term, that's what my cobuyer is planning on, as the house isn't well situated for them, while I'm fine with it being my 'forever home'.
This absolutely depends on your country or region, but -
It is so worth it not renting for me, I had nearly 20 years of renting or flatting, and stable landlords who won't sell or decide to renovate etc have been hard to find, so having to move every couple of years is stressful, and the cost of rent here is always at least that of a mortgage, and after a few years, the mortgage is usually much cheaper as rent prices keep going up. *And* you get the house at the end of it. It's been really good having that stability for the last few years even when I lost my job and had to get a new one. I still have housemates, so it's kind of like I'm still renting, I just have a very absent landlord called 'the bank'.
posted by Elysum at 3:05 PM on April 27, 2023
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You'd need to look at actual numbers to see how risky this is (like, what happens if your business takes a few more years before becoming a source of income?), but in the abstract (ignoring closing costs and other expenses) if you had, say, $500k in savings and wanted to buy a $500k house (and didn't want to drain your savings), putting down a $100k (20%) downpayment would leave you $400k, which would pay the mortgage for a very long time (but slowly drawing down your savings in the process).
Or, you could do the reverse of this: buy the house with cash (draining your savings), then get access to those funds again by getting a HELOC or home equity loan, which you would live off of while starting the business. Mathematically these options are probably going to be pretty similar in terms of cost, but with different levels of risk and other pluses and minuses.
There's a separate discussion of how to finesse the mortgage application if you know you are quitting your job soon -- there were one or two questions here about that exact issue not too long back, with good answers.
posted by Dip Flash at 6:13 AM on April 27, 2023 [7 favorites]