• Edward Payne

Want to buy a house but don't have a deposit?... It's not necessarily a problem.

So, you have a great job, a good income, you’re responsible with your finances, you’ve been paying your sky-high rent on time for years and your fed up of wasting money. You’re ready to make that big step and buy your first home but everything is so expensive and saving for a deposit seems impossible and after years you still don’t have anywhere near enough. It seems like you will never get that deposit together and you will never be able to buy a place of your own, right? Well, not necessarily, no. Many people without a deposit can buy a property thanks to a range of new mortgages and changing attitudes by lenders if you have a sponsor that is willing to help you. Normally lenders expect this to be from a parent or grandparent but lending criteria is changing and some will now accept gifted deposits from siblings or even step parents. Typically, lenders require the sponsor to provide a letter stating that the deposit is a gift and in some cases they may need evidence that the sponsor has sought independent legal advice depending on the nature of the gift. This has become very common and is widely accepted by a range of lenders. Even if you do have a sponsor who is willing to provide a deposit though, sometimes they are worried about doing this. Perhaps they really view it as more of a loan? Maybe they are worried about what will happen if you don’t keep up repayments on your mortgage or maybe they have concerns about your partner. In such cases there are a variety of options open to you and your sponsor. A Second Charge

Some lenders will allow a donor to put a second charge on the property you buy; that way if there is ever a problem and it needs to be sold (for example following mortgage default or a relationship break up) the donor can be paid their money back from whatever is left after the mortgage has been repaid. Placing the deposit in a savings account

In some cases, the sponsor doesn’t actually want to give the deposit as a gift or they can’t afford to, but they are happy for the money to be tied up for a period of time. In such circumstances, a number of lenders have mortgage solutions which are linked to specific savings accounts where the money has to stay for a set period, often between 2 or 5 years. The sponsor will often receive interest on their savings too and at the end of that period they can get their money back (although they may have to wait until the property has either increased in value or sufficient capital has been paid off by the borrower, typically 5%). What if my parents don’t have savings to give me or even lend to me?

Again, there are options available to you. Some lenders will allow a sponsor to use the equity in their own home in lieu of a deposit. In these cases a charge will be placed on both the new home being purchased and also on the sponsor’s home. Again, after a set period, the sponsor can be removed provided sufficient capital has been repaid or the value of the purchased property has increased sufficiently. Sponsors will normally need to demonstrate that they have sought independent legal advice and different solicitors often have to work for the various parties and do work in relation to the different properties. Effectively though you can use the equity in a property owned by someone else in lieu of a deposit. Other considerations

As a result, there will potentially be increased costs in relation to such transactions in relation to additional legal work and multiple valuations. Sponsors and purchasers should not enter into such arrangements lightly; their savings and homes can be at risk but the risks can be mitigated. In summary though, innovative solutions have been developed and are allowing more buyers to get on the property ladder where large deposits were previously a barrier to doing so. At Family First Finance, we specialise in advising families of the solutions available, we can set up multi party meetings or video calls with all concerned and can introduce you to specialist tax consultants and solicitors who can give you independent advice. For more details go www.FamilyFirstFinance.co.uk or call us on 0117 370 4231. #firsttimebuyer, #gifteddeposit, #springboardmortgage

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