It has been some time now since we saw the last of the 100% (Or sometimes even 125%) mortgages. With the realisation that property prices won’t keep going up forever, lenders have become wary of letting us buy a home without putting some equity in ourselves to protect them, should we not be able to keep up with the repayments.
There is however, still a way that you can obtain a mortgage without having to save for a deposit at all. As long as the mortgage lender will let you, you may be able to take out an unsecured personal loan to use as your deposit. Then you would owe say 10% of the value of your home to the personal loan provider and 90% to the mortgage lender. This will be a more expensive and more complex way of buying a house and great care should be taken when doing so. These types of loans require specialist advise to ensure you don’t end up taking out a loan, only to find out you can’t get the mortgage you wanted anymore, then being stuck with thousands of pounds of debt.
Likewise, you may have nearly of got the 10% deposit you need, and have seen your dream home for sale, only to think your going to miss out. Again, as long as your income is sufficient to support it, you may be able to bridge the gap with a personal loan.
The cost of buying a property in this way can be expensive and you should ensure that you feel that you will be able to meet the monthly repayments for both loans and that the mortgage lender and unsecured loan provider are happy that you can afford the repayments.
Although this trick can be used to help those with no deposit, it could potentially benefit anybody who is looking to get a mortgage. Say for instance you are looking to remortgage and you need a loan that is 82% of the value of your home, you could borrow the 2% using an unsecured loan, thus making you eligible for mortgage products which will lend upto a maximum of 80%. It is worth checking whether or not this ‘trick’ could benefit you every time that you take out a new mortgage. It is still vitally important that you make sure that the mortgage lender will allow you to do this first.
Getting the correct mix of secured loan and unsecured loan to ensure you have the best overall package can be a complicated area and you should contact an Independent Financial Adviser who specialises in mortgages to help you obtain the deal that is most suited to your needs. Kieron Bassett Financial Services have two Independent Financial Advisers. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com.
Jason Hinde CertPFS
17th May 2010