More on buying without deposit

I wrote a couple of weeks ago about the amount of enquiries mortgage brokers are facing around buying without deposit and I forgot to mention a couple of other important ways to buy without deposit in my previous post.

Firstly it is possible to arrange a gifted deposit from relatives or even possibly another interested party using a form of contract which entitles them to ownership of the relevant share of the property. This contract would allow you to buy the interested party out at your choice or entitle them to the share on sale.

This device gives the potential giftor a legal right to some of the proceeds of sale 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 deposit as well because many lenders will accept the discounted value of the property as the deposit as long as their valuation reflects the councils figures.

However if you are  eligible for a Right to Buy but live in a council flat don’t get too excited straight away as many lenders are restricting their exposure on flats due to the flood of 1 bed properties during the boom so if your property isn’t a house its a good idea to speak to a mortgage advisor and see whether a deposit will or will not be required.

Can I Buy without a deposit?

A big question for many first time buyers at the moment is how can I purchase a house without a deposit in the absence of 100% mortgage products.

One way that is possible is the governments Home Buy Direct shared equity scheme which allows customers to buy a house for 70% or more of its value, the developer or makes a loan for the remainder on an interest free basis which later reverts to a very low rate such as 1.75% after several years. Some of the property developers involved in the scheme are offering purchase without deposit.

The scheme operator is repaid either by staircasing (buying a larger stake in the property towards 100% ownership) or on sale of the property in which case they will take their percentage of the sale value.

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

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

However one way that usually wouldn’t work is if the vendor simply strikes the deposit value off the sale price. Known as a vendors deposit this is now very unlikely to be accepted and pretty much all lenders will take the lesser figure for the valuation leaving you back at square one.