Whenever you are considering buying a property a discussion will need to be had regarding how much deposit is available and where that deposit has come from. Below are some typical deposit sources we encounter regularly, so please read and get in touch if you have any questions or a different situation you wish to discuss.
Your Own Savings
If you have been able to save up your own deposit, then that is fantastic and will generally be very favourable to mortgage lenders. This includes savings in Help to Buy and Lifetime ISA’s.
Help to Buy
Please see our specific Help to Buy page.
It is increasingly common for people purchasing properties to be now using some form of gifted deposit and this is especially true of the First Time Buyer market. However, the deposit situation should always be taken into consideration and discussed thoroughly with your mortgage advisor or broker.
The major questions with gifted deposits are, who is the gift from? And will they reside in the property? In terms of ‘who is the gift from?’, I will run through some typical examples below. With regards to the person giving the gift residing in the property that can create problems. Whilst many mortgage companies will accept gifted deposits, far fewer will accept them if the person giving the money then subsequently is to reside in the property. It is still possible to get mortgages in this situation, but it is likely to restrict the amount of mortgage companies that will, and it should be discussed thoroughly with your broker.
Typical Gifted Deposit Examples:
Immediate Family: by immediate family most mortgage lenders will keep this to parents / guardians, grand-parents and siblings. In general, so long as the money is in the form of a non-repayable gift most mortgage lenders will accept this form of deposit. It is usual for the mortgage company to conduct checks and they may ask for a declaration and sometimes other documentation to confirm the source of the gift.
Non-Immediate Family: by non-immediate family this could mean uncles, aunts and sometimes cousins etc. Whilst many mortgage companies still will accept gifted deposits from non-immediate family, it will restrict the number of lenders that will. The amount of this restriction will depend on what relation they are to you. This should be discussing thoroughly with your mortgage broker.
Gifts from non-related people: any gift from third parties not related to you, for example a close family friend will again put restrictions on the who you can go to for a mortgage, typically this will restrict which mortgage company to use more than, if a family member was to gift you the deposit. It will be important to understand who and why the person is gifting you the money.
Gifted Equity / Concessionary Purchases
A gift of equity is where you buy a property for below market value because the vendor is selling it to you at a discount. This is common in inter-family sales and between landlords and tenants. For example, one situation could be; a property worth £200,000 is being purchased from a parent by their child. The parent has told them they can buy it for £140,000 and they will give them the £60,000 equity for their deposit.
When considering gifts of equity, a mortgage company will usually want to understand the nature of the relationship between the people, how much is being gifted and who will reside in the property. Situations with gifts of equity are usually more complex than those with gifts of money and so the number of mortgage companies who accept them are less. It is possible to get competitive mortgages with gifts of equity but please get in touch to discuss your situation.
Two other ways people can purchase a property utilising a discounted purchase price are: The Right to Buy Scheme and the Right to Acquire Scheme, please see our specific pages on those schemes by clicking the links below.
This usually isn’t a problem for mortgage lenders.
Sale of a Property you Own
This usually isn’t a problem for mortgage lenders.
The Armed Forces Help to Buy Scheme
Please see our specific Forces Help to Buy page.
Unsecured borrowing / A Personal Loan
Using a personal loan or other form of unsecured credit for the deposit will usually result in a mortgage lender declining an application. There are, however, some mortgage companies including some that offer competitive products that will consider this. To discuss your personal situation please get in touch.
100% Mortgages / No Deposit Mortgages
These are mortgages that do not require the customer to put a deposit down. They are still available from certain providers but are not as common currently as they have been in the past.
100% mortgages available now usually fall into two categories: Some of these types of mortgages require a third party, usually a family member, to place money into a savings account equivalent to the deposit for a set period. The other type is where a third party, again usually a family member, allows the mortgage company to place a charge on their property for the deposit. 100% mortgage situations again tend to be much more complex and so getting the correct advice is very important. Please get in touch to discuss your situation.