Is deposit from a loan a good idea when buying a house?

One thing is certain: in most cases, when buying a house, you will be required to have a deposit. So what should you do if you want to buy but don’t have enough deposit? Would taking a loan or borrowing from other people be a solution

We have been recently approached by some customers who had borrowed so they have a deposit and they were very disappointed to learn that this would not help them!

First of all, whilst lenders usually accept a gifted deposit (parents, siblings, grandparents can gift), on condition it is not repayable, only a very limited number of lenders would consider if the deposit was borrowed from a third party or from another lender. By taking this step, you are going to limit yourself extremely in terms of lenders’ choice.

Secondly, a loan for deposit may not only lower your credit score but it will also affect your affordability so the amount you could borrow as mortgage may get reduced!

Deposit coming from a borrowed amount is one of most common issues we see daily. Remember, before you take any financial decisions, you should speak to a broker first. Otherwise, you might end up with a loan but with no mortgage in the end!

Contact us if you have any questions.

Could you benefit from a Lifetime ISA?

What could be better than boosting your savings by further 25% when you are planning to buy a house? Could you benefit from a Lifetime ISA?

Here’s a couple of facts about a Lifetime ISA (LISA):

• A Lifetime ISA can be opened by anyone aged over 18 and under 40

• Savings made before 50 attract a 25% bonus from the Government (capped at £1000 per year).

• This bonus is paid monthly, so interest can be earned on the bonus too.

• A maximum of 4000 can be saved per tax year with no monthly limit.

• Savings can be used to buy a first home, to provide benefits in retirement from age 60, or in case of a terminal illness with less than a year to live.

• If savings are withdrawn for any purpose other than those stated above, a 25% charge is applied.

• If you have both a Help-to-Buy and Lifetime ISA, the benefit from only one of these can be used for a first home purchase.

To be able to buy your first home with LISA savings and bonus you must meet the below conditions:

• the property costs £450,000 or less

• you buy the property at least 12 months after you make your first payment into the Lifetime ISA

• you use a conveyancer or solicitor to act for you in the purchase

• you’re buying with a mortgage

If you have any other questions about buying a house, get in touch with us!

Extra capital raised on re-mortgage to help buy your first house to let!

Re-mortgage can be an opportunity to review your strategy and to see what can be done to start building your investment property portfolio .

Our success story this week is of clients who bought their first home with very little deposit 2 years ago and, on re-mortgage, we have now managed to get a deal that will let them borrow extra £30k to invest in their first property to let! This is a great outcome after only 2 years when they first bought a residential house.

Property values have increased over the last year and, despite all Covid related distractions, the market is very busy. It may be a good thing if you want to borrow extra capital on your home.

Every time your property grows in value, you gain more and more equity (ownership) which can mean benefits like:

• an option to borrow more,

• option to renegotiate your interest, or

• option to reduce the term of the mortgage.

Remember, every case is different and it has to be assessed on its own merit but when you are planning your re-mortgage, you should not just assume that switching product with the same lender is the only option available for you. Have a chat with a mortgage adviser to discuss what can be done.