If you are like many immigrants who come to the UK to start a new life but have to start from
virtually nothing you are more likely to live in a room /flat share with friends. This means more
savings, as you are cutting down in accommodation expenses, which is one of the largest
expenses when living in the UK. When buying a property, if your credit rating is good, most
lenders will consider giving a mortgage for up to five times your salary. Although your savings
might be good but when it comes to mortgage the amount of your annual salary plays a vital role.
If your salary is towards the lower end, you can only afford lower priced property. If you desire a
higher value property with the lower income then you would require higher deposit. This is
where deposits from family and friends (in case of immigrants possibly from abroad as well)
may come as gifted money.
Gifted money
Not everyone will have enough deposits to buy their first home. You do have the option to use
gifted money as deposit, as long as you have someone you trust and you can rely on and who is
willing to gift you their money. Remember, gifted money means the person giving it should not
be expecting the money back — it’s not a loan. It’s given in compassion, love or relationship
status. Using gifted money from immediate family members is quite straightforward; however, if
the gifted money comes from a friend or other sources, solicitors would want to know more on
why they are gifting you the money. In all cases the person gifting you the money should put in a
formal letter the reason why they are giving you the money and that the recipient is not expected
to return the money in any form. The person giving the money should be in a sound financial
position so disclosure of income and expenditure is necessary.
You can also use part your own and part gifted money as deposit.
E.g.
You qualify for mortgage of £100,000, you have £20,000 savings but the property you want to
buy is £130,000. In this scenario, you may be able to raise £10,000 as gifted money.
If the gifted money was coming from a sale of an asset or a property, you will need to prove the
sale. It could be that they had two cars…they sold one of the luxury car to raise money as the
gift. The sale transaction would be the proof of incoming funds. Funds received as gifted money
should be traceable and justifiable (being able to see where it has come from and how it has been
acquired – such as selling property/land or savings).
Joint Mortgage
When you want to buy that dream house but do not have enough deposit and salary to cover the
mortgage on your own, then Join Mortgage is one option.
It’s mostly common between family members e.g. husband and wife, or father and son etc., and
in some cases between friends. There are a lot of lenders who would lend to two people joint, but
if you are doing more than 3, you will find very few lenders on the market. Remember to make it
clear what percentage of each joint member’s contribution is going to the property in case of a
legal dispute. Your solicitor should prompt you to do this.
For example, husband earns 3 times more than wife. Mortgage responsibility could be the same
or 50/50, which you need to make it clear just in case of legal dispute.
Guarantor Mortgage
Guarantor mortgage is when a family or friend takes the responsibility of paying the mortgage in
case the main mortgage applicant cannot pay the mortgage that could be due to loss of job, less
earnings, high expenses etc. This is common when parents want to help their children get into
property ladder early in life.
Buy Small and Upgrade
If you are a person who is driven by numbers and follow your head rather than your heart, this
option might suite you.
A friend of mine wanted to live in a large modern family house but his salary and deposit was
not enough to purchase one at that time. In the same area he found another house which he could
afford but was small and needed some work. He researched the area well, and found there were
other similar houses that were extended to make into a larger property. An estimate to do the
extension was about £40,000, but he did not have to do the works straight away. So he made a
below market value offer to this property with a view to extend into a larger property when he
gets extra funds available sometime in future. So doing this he got in the property ladder early
and also had the option to upgrade to a larger property in future.