No Deposit

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No Deposit? Here’s some options…

A deposit is the amount of money that you will be required to provide towards the purchase of a property, with the balance made up from mortgage finance.

At the moment, there are no mortgage lenders in the UK market offering 100%  mortgages where no deposit is required. But don’t be too disappointed. You do have options.

It isn’t all bad. 100% mortgages did have its drawbacks. One, being that you’d probably end up paying a higher interest rate because there was more risk to the lender.

A major disadvantage of a 100 % mortgage is that you might find yourself in negative equity if the value of your property falls, which could be likely in the current climate.This means you could end up owing a lot more than you borrowed and you’d still have to pay back the lender the original price of the property.

 
There are many other options to explore if you find yourself without a deposit. Below are some of them. I would strongly advice you seek the help of a professional adviser to discuss your options.

Speak to us or a mortgage advisor if you feel that any of the options below would be suitable for you.

Also, remember it isn’t just a deposit you will need, there are also legal fees, stamp duty (if applicable) and fees charged by your mortgage broker, new furniture, decorating and moving costs





No Deposit – Option One

‘Key workers’ are people who work in certain public sector jobs, like NHS clinical staff, or teachers who are eligible for help to buy a home.

If you are a key worker some shared ownership schemes may offer you a no deposit option.

Find out more at Direct.gov.uk

 

No Deposit – Option Two

In some instances you may be able to borrow a deposit in order to buy a first home. But do take into account the extra monthly expense.

Interest rates are very low so there has never been a better time to get a cheap loan. In a rising market this can be the only way a first time buyer can get onto the property ladder. This approach is only advisable for those who have well paid jobs and a low debt to income ratio.

Get a personal loan quote here



No Deposit  – Option Three

Rent to own

Rent to own also known as lease options, rent to buy and let to buy are a very popular in the United States and are starting to pick up speed in the UK.

Rent to Own is when you are renting a property and at the same time you have the option to buy the property after an agreed period.

Nobody else can buy the property during the option period.

Deposits vary depending on the deal but in some cases the deposit can be as nominal as £1. Also in most cases you will be paying a higher rent than the average for your area as you will be paying toward the purchase of the property.

We have a lot of specialist knowledge in Rent to Own options so if this does appeal to you. Speak to us.





No Deposit – Option Four

The First Time Buyers' Initiative

FTBI – First Time Buyers’ initiative The First Time Buyers' Initiative (FTBI) aims to make more affordable homes available to first-time buyers priced out of the housing market. This scheme enables key workers and other eligible groups to purchase a new build home on a designated FTBI development, with an affordable mortgage and government assistance.

Some schemes want to see a commitment of at least 5% deposit whilst others will offer 100% funded deals.

No Deposit – Option Five

Parents and Family

See if a family member is prepared to lend money for a house deposit. Although the market is very flat currently, property has, on average, doubled in value every 7 years. Taking a long term view should result in the creation of equity, although historical data is never a guarantee of this.

The money borrowed could be re-paid when new equity is created further down the line via a remortgage. Alternatively, some of the money could be paid back each month and the rest when sufficient equity exists. Never borrow heavily after steep property price increases.

NO Deposit – Option Six

Saving for your deposit

If you feel none of the above options will work for you then realistically you will need to save for a deposit. Here are some of our saving tips.

Stay at home whilst saving

The main reason First Time Buyers struggle when saving for a house deposit is because of private rental.  Most rental properties cost in the region of £600 a month. If you saved the money you would otherwise be spending on rent , you might be able to afford to save as much as a 5% deposit within 12 months.

Work Overtime or Get a Second Job

Taking on additional work isn’t one of the easiest things to do  especially at the weekend or evenings , but it might be  necessary in terms of saving for a house deposit and the rewards could be well worth it. 



Cut Back on Non-Essential Spending

Whilst the rent and council tax have to be paid each month, there are always other excesses that can be cut back on. Consider doing a few of the following:

  • Walking or cycling to work. Travelling to work by car or public transport is becoming increasingly expensive. Living within a few miles of work allows someone to save £60 each month.
  • Take a lunch to work. Buying food from a department store or bakery can cost a small fortune. It is possible to save £80 each month by taking sandwiches to work.
  • Online price checkers. Check to see if getting the cheapest prices on different forms of insurance and utility bills. Tim Wolfenden, Head of Home Services at uSwitch.com stated "By not switching, consumers could waste over £2.3 billion in total or £334 each.

Use Tax-Free Savings Accounts when Saving for a House Deposit

It is possible to save up to £3,600 a year into an individual Savings Account (ISA). Taking advantage of lawful methods of tax avoidance is a useful way for first time buyers to save extra towards a house deposit.

Buying a home may feel like impossibile, but saving for a house deposit is possible if short term sacrifices are made. The best mortgage deals are available to those who offer the highest house deposit. The sooner lifestyle changes are made, the quicker first time buyers will get that foot on the ladder.


How good is your credit rating?

Your credit rating may affect the amount of deposit you need and may also affect the rate of interest you are charged. With a lower rating generally meaning the lender will be taking on more risk thus, charging a higher rate of interest.

It is a very good idea to make sure you’re credit rating is as high as it can possibly be.

The way to do this is to check your credit report across the three main credit report providers in the UK, Experian, Equifax and Call Credit and then if you see any discrepancies or inconsistent information request the credit reference agency change it.

Check My File offer a triple credit report service for under £20. It includes the information from all three credit reference agencies that the UK's largest lenders see when you apply for credit. 

The size of your house deposit may affect the interest rate you pay for some mortgage packages – the more you put down as a mortgage deposit, the lower the rate of interest you may be charged.

A deposit for your first home can be anywhere between 5% to 25% depending on a number of factors.

To find out what sort of deposit you might be required to get together – find out how much you can borrow – take mortgage advice.