In terms of mortgage products, the days of 100% and 125% have been and gone but now that the credit crunch is now far behind us Lenders are now started to be more confident with offering bigger bands of mortgages such as 95%. With these Lenders are able to maintain the comfort of knowing you have something to lose should situations change in regard to your ability to keep up monthly payments.
It is known by many that it’s difficult to save up for a deposit for many people and thus can be a barrier for entering the property market and can be daunting in many cases. A lot of clients ask many deposit related questions to which answers have been provided.
The higher the deposit that is put, the lower the interest rate that the Lender might be able to offer you. This is for the reason that you pose less of a risk if they lend to you. So the bigger your deposit, the less expensive band you receive. For example, if you put down a 5% deposit then you’ll be offered a 95% band.
This can be possible but there a limited circumstances. The Lender will put the monthly payment as an additional credit commitment and therefore grant you a smaller mortgage as opposed to one you would have received if you had not borrowed the deposit. This does not go down well with Lenders.
Gifted deposits are common and are widely accepted. When going through the gifted deposit route the ‘donor’ must be willing to confirm that it’s a gift and not a loan and will need to present forms of ID and proof of funds for anti-money laundering purposes. If it wasn’t for gifted deposits then the property market would be very different to how we know it.
For Anti-Money Laundering purposes, all applicants will need to provide bank statements to evidence funds as lenders like to see how the funds have built up over time. This is the reason as to why any large deposits that have been deposited will need to be provided with documented evidence. For example, if you have sold a car, the amount you have sold it for needs to match the receipt you provide and the amount that is shown in your bank account. Large cash amounts can delay the application as the audit trail can prove to be the trickiest part, although the longer the funds have been in your account, the easier it all gets.
If you are selling a property, then the Memorandum of Sale provided by the Estate Agent is your proof.
It’s still 5% as a minimum if you qualify for the Government’s Help to Buy scheme. This can then be topped up to 25% via the equity loan so you will obtain a lower rate mortgage. Don’t forget if you opt for this then the 20% deposit provided by the Government is a loan not a gift and will need paying back.
Not always. If it is a genuine discounted purchase, i.e. the house is worth £100,000 and you have been offered it for, say, £90,000 then some Lenders will accept this as your deposit. This works really well if you have the Right to Buy from the Local Authority or other Social Landlord.