While saving for a deposit is the traditional route to homeownership, there are alternative options for those who may not have the luxury of time or the means to save a substantial amount of money upfront. Here are some strategies to consider if you need to raise a deposit for a mortgage without saving.
Gifted deposit
If you have family members or close friends who are willing and able to help, you may consider asking them for a gifted deposit. Lenders may require a letter from the gift giver stating that the money is a gift and not a loan that needs to be repaid. Gifts can be protected by a deed of trust, and this could reassure families reluctant to provide a gift to a young couple.
Equity from another property
If you already own a property, you may be able to use the equity from that property as a deposit for your new home. Equity is the difference between the current value of your property and the amount you owe on your mortgage. You can either sell your current property and use the proceeds as a deposit for your new home or raise money against your old home, rent out the property, and use the funds raised as a deposit.
Shared ownership
Shared ownership is a government-backed scheme that allows you to buy a percentage share of a property (typically between 25-75%) and pay rent on the remaining share. This can be a more affordable way to get on the property ladder with a lower deposit requirement. Over time, you can gradually buy more shares of the property until you eventually own it outright. Shared ownership schemes are usually offered through housing associations or local authorities.
0% options
There are some lenders that have 100% mortgage options. This requires involvement from family or friends to offer a guarantee to help secure the mortgage.
It’s important to note that these alternative options may come with their own set of pros and cons, and it’s essential to thoroughly research and understand the implications before proceeding. Consulting with a mortgage broker can also provide valuable guidance and help you make informed decisions. While saving for a mortgage deposit is the most common approach, exploring alternative options may provide a feasible path to homeownership for those who are unable to save a substantial amount of money upfront.
Your home may be repossessed if you do not keep up repayments on your mortgage
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