First time buyers are the largest group of people who struggle for the illusive deposit, but those people having suffered a relationship break up can find that by the time they have paid off the joint debts and sold the property at a reduced price in order to get a quick sale, then split the proceeds, there is not much left to start again and apply for another mortgage. Also, those who have sold their property to clear mounting debts, and again, once the debts have been cleared there is often very little left to use as a deposit for the next mortgage.
Here are 3 ways of buying a property with little or no deposit saved –
1. Search around new property developments to find a builder who will provide you with a 5% or even 10% deposit for your mortgage. This is referred to as a ‘builder’s gifted deposit’. Not all lenders accept builders gifted deposits but many do and it’s a great way to get you started.
2. If you are employed, you have been in your job for at least 12 months, you are not heavily committed to many loans or credit cards and you have not had any late payments, defaults, CCJ’s or arrears for the last 2 years, then you may be able to access a 100% (no deposit) or 95% mortgage.
3. The third way is popular with investors. Find a property which has been reduced in price or negotiate a lower price, ie, It has a value of £100,000 and you manage to buy it for £80,000. You have made a 20% saving. You buy the property with a Bridging loan, which is a short term mortgage requiring no deposit. Once you own it, you remortgage the property and you can increase your borrowing from 80% loan to value to 85% or 90%. This would then release 5% or 10% of the equity giving you £5,000 or £10,000 cash released based on the example above. The Bridging loan would probably cost 2% (£2,000), with no deposit required, and for most properties over £125,000 there would be stamp duty to pay and the solicitor fees would probably cost around £1,000. Releasing just 5% would probably cover all of your fees associated with the purchase and you have just achieved raising a mortgage with no deposit contribution from you.
Clearly, you can see there are ways of purchasing a property with no deposit from the purchaser. Likewise, for those who can afford to pay a deposit for their mortgage, you could leave the money in the bank, simply by negotiating your deposit from the seller. Negotiating is a required skill for those building portfolios of properties, what we are talking about in item 3, is using the same technique to purchase your home.
Steve Croxton is a BDM for http://www.12and3.co.uk/mortgage.html We apply creative thinking using standard mortgage and remortgage products to find solutions for our clients. Who ever you may have spoken to prior to speaking to 12and3, Do not believe the answer is no to your mortgage needs until we tell you no.
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