4 Ways to Increase your Mortgage Deposit
We all know that the best way to raise a mortgage deposit for your first home is to save up the money. Not only will you build interest on your savings as you go, but you’ll also appreciate your house a lot more when you get it. You’ll take making the mortgage repayments a lot more seriously too, because you won’t want to let those many years of saving go to waste by losing your home. What if you’ve been saving for years though and you are ready – or need – to buy a house soon, yet you are still coming up short on the mortgage deposit you have available to buy the house that you want? What can you do in this case? Are there any other ways in which you can raise a mortgage deposit or the remainder of one?
Well, there are certainly ways by which you can raise the extra money required and we’re going to mention 4 here. I should state that we are not recommending that you should raise a mortgage deposit in this way. We are merely saying that you can if you feel this is the right thing for you to do in your own circumstances.
Family Gifted Deposit
The first port of call for most people when they are short on their mortgage deposit is to see whether a family member might be willing to help them out. Lenders refer to this as a ‘family gifted deposit’ and you will likely be asked to prove where the deposit has come from. Most lenders will accept this deposit source but they may limit the amount of the deposit that can be funded this way to a certain percentage of the purchase price of the property, usually around 5% at the time of writing.
Vendor Gifted Deposit
Vendor gifted deposits are similar to family gifted deposits but they are offered by the seller of the property instead. Not all lenders accept vendor gifted deposits so you will need to ask your mortgage broker to check the criteria of each lender to find one that will accept this deposit source. You won’t physically be handed the cash from the seller, it will just be gifted to you on paper at the time of completion. It is worth bearing in mind that when a seller is doing this they are effectively giving you a discount on the purchase price or valuation price of the property, so it may take some negotiation on your part or you may even have to explain the process to the vendor if you are hoping to use this method but they are unsure about what it entails. Vendor gifted deposits are usually restricted to 5% of the purchase or valuation price, if they are accepted by a lender at all. Most lenders will only accept them on new build properties and if any kind of vendor gifted deposit is involved then it must be declared to the lender.
Vendor gifts are also sometimes offered in the form of a cashback incentive, which is paid when the purchase of the property completes. In this case the money will be transferred to you after you’ve bought the property, so this option will not help you to fund the deposit prior to the purchase. It could still free up cash for your deposit however, if you know that you won’t need to hold some money back to furnish the property because you’ll be receiving some funds after completion.
Help to Buy
If you’ve been trying to save up a big deposit in order to lower your mortgage costs but for whatever reason time is working against you and you need to buy soon, then it’s possible that the government’s ‘Help to Buy’ scheme might be able to help you get to where you need to be. I’m sure you’ve heard of this scheme by now but if you’re still not sure on exactly how it works, then you can find out more here. Or again, you could ask your mortgage broker.
This option might seem like a bit of an obvious one, but maybe you haven’t considered the idea of selling something of value that you own. Perhaps you have a motorbike lying around in the garage which doesn’t get much use. Or maybe you could survive as a couple with one car instead of two for a while? Have a think about anything of value which you might own that you might be willing to part with if it means you can achieve the dream of buying your own home.
So there we have 4 ways to effectively raise your mortgage deposit. Can you think of more?