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Tag: 100% Mortgages

More on buying without deposit

I wrote a couple of weeks ago about the number of enquiries mortgage brokers receive about buying without a deposit.

But I forgot to mention a couple of other important ways to buy without a deposit in my previous post.

Firstly it is possible to arrange a gifted deposit from relatives; or even possibly another interested party, using a contract which entitles them to a specific share of the property. This contract would allow you to buy the interested party out at your choice; or give them a share upon any sale.

This device gives the giftor a legal right to some of the sale proceeds, even if values continue to fall, and much more certainty of receiving their gift back in the future.

Also, those who are lucky enough to have the right to buy a council property may be able to buy without a deposit as well because many lenders will accept the discounted value of the property as the deposit as long as their valuation reflects the council’s figures.

However, if you are eligible for a Right to Buy but live in a council flat, don’t get too excited, as many lenders are restricting their exposure on flats due to the flood of 1-bed properties built during the boom.

So if your property isn’t a house, it is a good idea to speak to a mortgage advisor and see whether a deposit will be required.

Mortgage Broker Q&A; can you buy a home without a deposit?

A big question for many first-time buyers is whether it is possible to buy a property without a deposit; in the absence of 100% mortgage products.

One way is the government’s Home Buy Direct shared-equity scheme, which allows customers to buy a house for 70% or more of its value.

The property developer makes a loan for the remainder on an interest-free basis which reverts to a low rate, such as 1.75%, after several years.

Some property developers involved in the scheme offer purchases without a deposit.

The scheme operator is repaid by “staircasing” (the owner buying a bigger share later on); or on the sale of the property, in which case they will take their percentage of the sale value.

Housing associations also run similar schemes known as “shared ownership”, where you purchase between 25-75% of a property and pay a nominal rent on the remainder; however, these may require a small deposit. Broadly both schemes are similar.

To find out more, search for Home Buy Direct on Google or for housing associations in your area.

One way that won’t usually work is the vendor reducing the sale price. Known as a vendor’s deposit, this is very unlikely to be accepted (in the present climate of declining property prices).

So pretty much all lenders will take the lesser figure for the valuation, leaving you back at square one.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. WE TYPICALLY CHARGE AN ADVICE FEE OF £299 PAID UPON FULL MORTGAGE OFFER. SOME BUY TO LET AND COMMERCIAL LOANS ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
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