Can’t Afford A Deposit ?

Buy Property Without A Deposit

With lenders pulling low deposit mortgages from the market right, left and centre it’s no wonder first-time buyers are despairing about ever being able to afford a property.

But if that’s you – fear not.

There are other ways to buy a property without having to save for a down payment of around £20,000. Some are easier than others, but all of them will get you that crucial first step on the property ladder. To find out about your ‘100 per cent mortgage’, read on:

Can't Afford A Deposit ? Burlington George

Guarantor Mortgage

As the name suggests, this is where another person ‘guarantees’ that they will be able to pay the mortgage if you can’t. Usually it’s parents who step in for this kind of deal. The guarantors name will go on the mortgage along with your own if they’re accepted by the mortgage company. It’s expected that the guarantor will already own their own property, have a good income and an exemplary credit record.

In this scenario they can use their own property as security (if they have enough equity in it to cover your deposit). That way it means if you can’t keep up with the mortgage payments then the lender will get their money back from the equity in the guarantor’s house. The lender may be looking for 20 – 25 per cent security against the value of the house you’re looking at.

Guarantor Mortgage (Savings As Security)

This is similar to the first scenario but this time it is savings that the lender secures as your deposit. Your guarantor would have to put the money used for the deposit into a separate account which is held by the lender. The latter then ‘frees up’ the sum after you have paid off a certain amount of the mortgage to allow equity to build up. If this is you, look around for an account where the savings will get interest. Be aware too that using equity for security means the guarantors own mortgage Loan to Value will be affected meaning re-mortgaging will prove costlier.

Gifted Deposit Or Borrow The Money

A generous friend or your parents can always ‘gift’ you the cost of a deposit – and many lenders are happy to accept this. You will need to provide a written declaration stating the money won’t have to be repaid.

Vendor Gifted Deposit

This is a clever way of buying a house without a mortgage but it needs some negotiating skills. If you can, for instance, negotiate a five per cent discount on a New Build then it will be five per cent below market value so you already have five per cent equity in it. Some lenders will accept this as a contribution towards a deposit.

Renovate The Property

If it’s possible to borrow the money to buy a run-down property then do that and renovate it. That way once you’ve done it up it will be worth far more than you paid for it. You can then re-mortgage with another lender and the difference in value will be your deposit. A word of warning – just make sure there are no early-repayment fees with the initial mortgage.

New Build Developer Loan

Some developers allow you to ‘borrow’ the deposit from them. This is in the form of a loan. It does mean, however, that you have to pay them back every month as well as your mortgage.

Right To Buy

Provided you have lived in your local authority property home for at least three years you could be entitled to buy it at a discounted price. The difference between the value of the house and what you paid for it is considered your deposit by some lenders.

Shared Ownership

You can buy a percentage of a property under a Shared Ownership mortgage. This is usually from 25 to 75 per cent of a property’s value. You pay rent on the remainder. This means that there is still a deposit to pay but it’s very minimal eg if you have 25 per cent of the house then your deposit will only be around £1,000 to £2,000.

Get In Touch

If you’re looking for a no deposit mortgage or would simply like advice on other kinds of mortgages and/or property purchasing, then do get in touch with us here at BurlingtonGeorge.com. You can call us on 0203 285 8310 or send an email to enquiries@burlingtongeorge.com.

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