Purchasing a Home on a Low Deposit
Tuesday 26 January 2010, 9:26AM
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We are getting alot of enquiry about finance for a property on a low or no deposit , so just to help people in this situation here are some guide lines.
Lenders loaning to owner occupiers on 5 to 15% deposits are seeking that you can prove you have actively saved the deposit in other words it hasn't been gifted to you. By exercising that you have saved the funds yourself as an individual or a couple this is the primary rule the lender stipulates.
A registered valuation is always needed by lenders, in this valuation they need to see there is no deferred maintenance to do on the property. In other words you haven't saved the minmum deposit just moved in and then suddenly you have a renovation project and your funds are taken up doing this task. This is a caution for lenders as due to the highly leveraged property, having the repayments for the mortgage being paid on time is paramount so they don't want to see your income disposed else where and threaten your repayments.
Also as the property market flactuates at times your equity could be nil on a highly leveraged property so the lender is loaning you the funds long term, so if you have to sell the property for any reason you may not have the equity in the property to pay things like, break fees (fixed term mortgage) , real estate agent fees, marketing costs, solicitors fees etc.
There are insurances the lender has to add to a highly leveraged loan above 85% lending , this is a mortgage insurance. It is in place incase you do default the lender is insured against the shortfall on the loan should it sell at a loss for the lender. This does increase your loan repayments so again it is important you can prove to a lender you income is strong , the property has no required maintenance and you are purchasing long term.
It is also important to have all other debts or HP's out of the way so all your residual income is not disposed of. You may have to pay principal and interest on your loan. The advantage here for a lender is they see some small reduction in the principal of the loan on an ongoing basis.
Should you be in this position of wanting to purchase and wish to discuss your options contact Kent Finance Ltd.
Contact: Amanda
Ph 0800 80 90 60