Investomind

Finding Deposit for Your Property

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.

Why is this time Right to Remortgage your property?

Why is this time right to Remortgage your property:

The UK mortgage market has been extremely active since the last recession when worldwide base rates hit historic lows. Even though base rates have started to creep up gradually, many think tanks believe it will still be awhile before they get anywhere near their traditional levels prior to the 2008 recession caused mainly by the mortgage sector crash. As a consequence, it makes perfect sense for homeowners to at least investigate the opportunities to remortgage their property and reduce high interest charges.

Even though some property markets around the world have struggled since the 2008 mortgage crisis, many luxury property markets have enjoyed significant growth. As a consequence, when remortgaging it may also be possible to utilise a degree of the increase in property values in recent times. Assuming you’re able to secure relatively low mortgage rates, fixed for two, five or even 10 years, there is the opportunity to slash mortgage payments and increase net investment returns in the longer term.

While a remortgage might be a good financial move for many homeowners, it isn’t right for everyone. People who are already in a stellar mortgage deal or who own less than 25% of their home probably won’t find a deal in the remortgage market. Borrowers with bad credit or very small mortgages may also find the process of applying and paying for a remortgage is not worth the effort or the money.

Here are some pros and cons for you to consider before moving forward with the remortgage process.

Some of the pros of remortgaging include:

  • The ability to borrow at a lower interest rate
  • The option of utilising your home’s equity for additional cash
  • The opportunity to switch to a product more suitable to your financial situation
  • The flexibility to consolidate your debts into a single, affordable monthly payment

There are some drawbacks to a remortgage as well, which include:

  • Stretching your debts to a longer time frame increases the overall cost
  • When your home is used as collateral, it can be repossessed if you cannot keep up with the payments
  • There are fees attached to remortgages, which may counter any of the benefits you might receive from negotiating a lower rate on your loan
  • The remortgage process can take a number of weeks to complete, so you will need to be committed to the process to see it through to the end

Source: Islay Robinson (Enness)