In this brief blog post, we will discuss getting help with mortgage deposit and how you can access such help.
Help with mortgage deposit
Saving a mortgage deposit can be very hard but luckily there are several schemes out there which can offer you help. Most of these schemes are provided by the government but there are now schemes provided by private companies, mortgage lenders, property developers and local councils which help with mortgage deposit.
Aside from these options, you can also get help with your mortgage deposit from your family or friends.
Family help with mortgage deposit
The bank f mum and dad has become a very big lender in the UK and funded hundreds of millions of mortgage deposits last year by gifting the mortgage deposit to their family members.
Some family members were gifted their mortgage deposit whilst others were loaned the mortgage deposit.
Not all mortgage lenders will accept gifted mortgage deposits and those who do will require a gifted mortgage deposit letter to ensure that the mortgage deposit is indeed a gift and not a loan.
Some mortgage lenders will allow a mortgage deposit to be a loan from a family member but will want to see the loan agreement, its terms and any other related information to ensure that the loan will not affect the mortgage lenders first charge mortgage.
If you want help with your mortgage deposit and choose to get it from your family then ensure the mortgage lender which you or your mortgage broker apply to will accept the type of mortgage deposit you have.
You may also to get help with your mortgage deposit by having a family member or friend help you get a guarantor mortgage which could reduce the strain of a mortgage deposit for you.
Mortgage lenders help with mortgage deposit
Some mortgage lenders will also offer you help with your mortgage deposit by essentially reducing the amount of mortgage deposit you have to put down to 0. This means you can get a mortgage with no need to save up for a mortgage deposit at all.
Mortgage lenders do this through a family deposit mortgage but more commonly known as the family springboard mortgages, they include mortgages from lenders such as the Barclays family springboard mortgage, the Lloyds lend a hand mortgage and the post office family link mortgage.
These family deposit mortgages act as a form of guarantor mortgages but they aren’t, instead they allow a family member to put away their saving in an account linked to your mortgage for a fixed timeframe which allows you to get a 100% loan to value mortgage. Their savings are held for a fixed period (usually 3 years) and returned to them after 3 years if all monthly mortgage repayments have been made on time.
Government help with mortgage deposit
The Uk government has a range of first-time buyer and home mover schemes which you may be eligible for to us to help with your mortgage deposit.
Some of these schemes include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year. This means you can save for a few years and put this government bonus towards your mortgage deposit.
- Help to buy ISA– gives a maximum bonus of £3,000 if you save the maximum allowed of £12,000. This means you can use this government bonus towards your mortgage deposit. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.. You won’t be allowed to use the government bonus from both of them. You must pick one.
- Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan which effectively increases your mortgage deposit. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage. Whilst the shared ownership doesn’t directly affect your mortgage deposit, it indirectly reduces the amount of mortgage deposit you may have had to put down by allowing you to buy a share of the property.
- Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion. The rent to buy scheme allows you to rent a property at a discount market rate of 80% and then save the remaining 20% towards your mortgage deposit. You will have the option to buy the property at the end of your rental tenancy and if you cant your tenancy will not be renewed.
- Right to buy- allows you to buy your council home at a discount price. This means you will be required to pay a smaller mortgage deposit.
- Preserved right to buy- same as above but reduces some restrictions to accommodate other potential eligible prospects.
- Right to acquire- the right to acquire allows you to buy your housing association home at a discount. This means you have to put down a smaller mortgage deposit.
These are some of the ways the government helps with your mortgage deposit.
Most of the government schemes which help with your mortgage deposit insist on your being creditworthy enough to get a mortgage and in some cases, the schemes have their own criteria of what they won’t accept in regards to bad credit.
If you have bad credit and you are concerned the government scheme which you want to use won’t accept you and you may lose your help with the mortgage deposit then you should contact the scheme provider and inquire further.
private companies help with mortgage deposit
Some private companies now offer propositions similar to the governments help to buy equity loan scheme where they lend you some money in order for you to be able to add this towards your mortgage deposit and buy a home.
Council help with mortgage deposit
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council.
With these schemes, the local council will look to provide affordable housing for its residents. These properties will usually be cheaper than similar properties listed on the housing market meaning you essentially have a smaller mortgage deposit requirement.
Example: In Norwich, the local councils provide the Norwich home options scheme.
Use a mortgage broker for your mortgage in principle
You may want to use an independent mortgage broker to help you get a mortgage on your new home.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.
This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle.
This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application.
Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.
It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.
They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.
This will then bring an end to the conveyancing process, at which point you will receive the keys to the house and move in.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.