Sometimes your circumstances make it harder for you to secure a mortgage or you might need some help getting on the property ladder. This might mean that a specialist mortgage is your best option.
Mortgages with a gifted deposit
More and more first-time buyers are using gifted deposits to get a mortgage. However, if you are relying on a gift, you'll need to be aware of the implications. Gifted deposits needs to be a gift and not a loan. In some cases, lenders will ask for proof from the gifter that the amount is a gift and that they do not expect repayment.
Different lenders have different rules surrounding gifted deposits. Your mortgage broker can advise you on the particularities of using a gifted deposit.
It's important to remember that if the person gifting you the money dies within seven years, you may need to pay inheritance tax.
Joint Borrower, Sole Proprietor (JBSP)
JBSP mortgages are a type of mortgage where not all parties to the mortgage are the legal owners of the property. For instance, if there are two borrowers in this scenario, both will be liable for the mortgage but only one will be named on the title of the property.
These mortgages allow parents, guardians, friends or family to support would-be first time buyers with the affordability challenge of getting on the housing ladder.
Mortgage for a Concessionary purchase
A concessionary purchase is a term for a property that is bought for less than its market value and, as you can probably guess, concessionary mortgages can be used to buy a property that's sold at a discount. Some concessionary mortgages are easier to get than others. Mortgages involving family members are much easier to get than if a buyer was purchasing from a private seller.
Here's an example of how concessionary mortgage work. Imagine your parents want to help you onto the property ladder. To do so, they offer to sell you a property they own at a discounted price.
Let's say that this property is worth £150,000 but your parents want to sell it to you for a discounted price of £120,000. The surplus of £30,000 would then act as your deposit. Most lenders still require you to have 5-10% deposit, depending on the rest of your application and the lender in question.
With this type of mortgage, a parent or close family member takes on some of the risk of the mortgage by acting as guarantor. If the homeowner misses a payment, this person is responsible for covering the missed payment.
The main benefit of this type of mortgage is that you can sometimes borrow up to 100% of the property's value as the guarantor's collateral is used in place of a deposit. This can make them an attractive option for young people or lower earners.
On the negative side, your guarantor could be liable for any shortfall if your property has to be repossessed and sold.
The guarantor can't be just anyone. Most lenders will require this person to be a close family member - usually a parent.
Becoming a guarantor is a big commitment. The lender will either hold some of the guarantor's savings in a locked account or take legal charge over a portion of their property to secure the mortgage.
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Your home may be repossessed if you do not keep up repayments on your mortgage
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