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For first time buyers in Sunderland hurdles in mortgage, acquisition is something often faced by lots of customers, and they are not impossible to deal with either. Here is a list of 5 common problems people may encounter when looking to obtain a mortgage in Sunderland.
Childcare fees are not a reason per se for a mortgage to be turned down, rather they tend to reduce the amount a mortgage can offer.
One thing that needs to be noticed is that when parents or guardians return to work and pay for childcare, they have to monthly dedicate hundreds of pounds. Lenders take them as a liability similar to car loans.
If childcare fees are not to be paid, and still the income is low, the guardian or parents might still not get as much amount as other applicants. However, this benefits by being considered as tax credits.
If you seek mortgage advice in Sunderland, you will come to know that such lenders exist who don’t count childcare fees as outgoing funds, resulting in higher chances of mortgage acquisition.
If things don’t work out in a relationship and you decide to go for separation or divorce, things tend to get tough when it comes to your monthly mortgage repayments.
Normally we get these three questions when people seek mortgage advice in Sunderland:
The answer to all of the above can be yes, but you will need expert Mortgage Advice in Sunderland. If you end up receiving maintenance, this can sometimes get used as part of the assessable income for a mortgage.
You would be happy to know that almost all types of benefit incomes are considered as incomes and include pension or eligibility for pension, disability benefits, working tax credits, and child tax credit.
To take advantage of such opportunities, all you need is to seek out mortgage advice in Sunderland and you will be good to go.
This one comes up a lot, but it is usually easy enough. Some Lenders need you to have been in work continuously for a certain period, but others don’t. You can even get a mortgage if this is your first job. If you are due to start a new career soon, then you may be able to get a mortgage if you have a signed contract and job offer letter.
Gaps in employment can be a problem with some Lenders. Probationary periods tend to be ok, in any case.
Anit-Money Laundering precautions are pretty strict these days. All Lenders will need you to evidence your deposit, and you will get asked to prove where the money came from. Your Solicitor and the Estate Agent you are buying from may ask you for this too.
Cash is a big no-no. Any significant cash deposits into your Bank will question, and your application may get rejected.
It is possible, in fact, regular, for some or all of the deposit to come from a gift. The person gifting you the money will need to confirm in writing that it is a gift, not a loan.
All the content provided above is for reference purposes only, and does not constitute mortgage advice.
When you begin the process of looking for a mortgage in Sunderland, you will soon realise that there are a wide variety of different options available. By enquiring for expert mortgage advice in Sunderland, we’ll help you to determine which one is right for you.
Below you will see a list of the most popular types of mortgages available on the market. If you have any questions regarding the mortgage options below, do not hesitate to contact our fantastic team of mortgage advisors in Sunderland.
A fixed-rate mortgage means that your mortgage payments are going to remain consistent for a particular duration. You are able to choose how long you fix your payments for, with this typically being around 2-5 years.
This means that no matter what happens with inflation, interest rates, or the economy, you know that your mortgage payment, which will most likely be your biggest outgoing, will not change.
When you have a tracker mortgage, this means that your interest rate will follow alongside the Bank of England’s base rate. In this situation, the mortgage lender that you are with will not be setting the rate themselves.
You will be paying at a percentage above the Bank of England base rate. For example, if the base rate is 1% and you are tracking at 1% above base rate, that means you will be paying a rate of 2%.
Home buyers who are looking to take out a repayment mortgage will have a combined amount of capital and interest to pay each month.
If you are able to maintain those monthly mortgage payments, he mortgage balance is guaranteed to get paid off at the end, with you owning the property outright.
A repayment mortgage is generally considered to be the most risk-free way to pay your capital back to your mortgage lender. Early on it will mainly be the interest that you are paying and your balance will reduce very slowly, especially for homeowners with say a 25+ year term.
This will change over time and in the last ten years or so of your mortgage, your balance will be reducing at a much quicker rate, as you will be paying back more capital than interest.
While you will find that a lot of buy to let mortgages in Sunderland get set up on an interest-only basis, it is much difficult for a residential home buyer to take out an interest only mortgage on their home.
Typically, you will find that it is much less likely for a mortgage lender to offer interest only residential products to customers, though there are a selection of circumstances where this type of mortgage may still be applicable.
These tend to include downsizing when you are older or have other investments that you will use to pay the capital back. Mortgage lenders can be quite strict when it comes to offering these products now, and the loan to values are a lot lower than they used to be.
With an offset mortgage, your mortgage lender will go ahead and set you up a savings account that will run alongside your mortgage account, to help you offset the balance and reduce the interest paid overall.
For example, let us say you have a mortgage balance of £100,000 and £20,000 is deposited into your savings account, you only pay interest on the difference, which in this case would be £80,000.
It is for this reason that an offset mortgage could be a truly efficient way of managing your money, especially if you are a higher rate taxpayer.
If you like the sound of any of the mortgage options that have been mentioned above, have any other questions relating the mortgage process or would like to get the ball rolling on your mortgage journey, please do get in touch.
In booking your free mortgage appointment online, you’ll benefit from speaking to a trusted and qualified mortgage advisor in Sunderland, who will look to guide you through the process as best they can, finding the most suitable mortgage product to fit your circumstances.
With any mortgage that you take out, you will be paying a combination of capital (the balance) and the interest (at a percentage of the remaining balance). You may actually be able to reduce the amount of interest you pay per month, by taking out an offset mortgage in Sunderland.
When a mortgage applicant takes out an offset mortgage in Sunderland, their mortgage lender will open a savings account for them, in their name, to run alongside their mortgage term. This savings account will not pay back your mortgage balance, but instead will lower the amount of interest that you pay.
So if we were to say, for example, that you had a £100,000 mortgage to pay off and put £20,000 into your savings account, you’d still have that £100,000 mortgage to pay per month, but you only pay interest on £80,000.
The amount of interest that you will have to pay is generally calculated at a percentage of your mortgage balance, which is what increases the overall cost. In short, the more interest you offset into your savings account, the less that you have to pay back on interest overall.
This of course, can save you a lot of money.
As mentioned above, the money that you deposit into your savings account will offset against the interest, reducing the amount that you pay overall. Unlike a standard savings account, you will not be paying tax on your savings, which can be beneficial for higher rate taxpayers.
A possible downside to this type of mortgage, is that your savings will not see any growth either. Interest will not be earned on any of the savings that are linked to your offset mortgage in Sunderland.
Even with this in mind, a potential offset mortgage applicant may not be deterred, especially with the potential for savings by offsetting the interest against the mortgage balance. Additionally, the flexibility of the account is another positive.
Using the aforementioned example of a £100,000 mortgage and £20,000 in savings, if you for any reason needed to dip into your savings, you have the freedom to do so. It’s important to remember though, that you would be paying interest on a higher balance amount.
So whilst with the savings in you would be paying interest on £80,000, if you drew out £10,000 to use, you would be paying interest on £90,000 again until you deposited further funds back into your savings account.
You will still have the responsibility of maintaining your monthly mortgage repayments, you would just have less interest to pay per month.
If you managed to offset our entire balance towards the end of your term (maybe through a combination of work bonuses and an inheritance helping you to achieve this), you would still be responsible for the repayment side of things, until the end of your mortgage term.
As mentioned earlier on, your monthly mortgage payments will be a combination of interest and capital. Whilst offsetting your whole mortgage balance would effectively reduce your interest rate to nought, the capital will still remain and require payment.
Depending on your mortgage lender, you may be able to repay your mortgage by a specific additional amount each calendar year. As a general rule of thumb, you can repay up to 10% per year, though you should always ask your mortgage lender prior to doing this.
Overpaying by too much per year can result in you owing an early repayment charge to the mortgage lender.
Whilst there may be a limit on the amount you are able to overpay on the mortgage balance, you are free to deposit as much funds as you would like to into your savings, whenever you see fit.
There is a lot to consider when dealing with an offset mortgage, as to whether or not it is the most suitable mortgage option for you. This can be quite a difficult decision, especially if you are applying for a first time buyer mortgage in Sunderland.
Really, it’s all about weighing up the positives and negatives. As said previously, this will be beneficial to higher rate taxpayers because they can deposit savings tax-free. Again, they are also very flexible, allowing you to deposit and withdraw funds at any time.
Another positive, especially for a first time buyer in Sunderland, is that someone else may have the option of offsetting against your mortgage. This means a family member could help you lower your interest rates, though this varies from lender to lender.
On the other hand, offset mortgages in Sunderland usually have higher interest rates than other mortgage deals that could be available to you. You are more or less paying a premium for a flexible mortgage type with the ability to offset against the interest.
Additionally, as touched upon above, you won’t be earning any interest on those savings as you would with a regular savings account. Furthermore, whilst you could offset against the interest if you come into more money, you could also just overpay your mortgage to reduce the balance.
There are many different reasons as to why it could be a good or bad idea for a home buyer. At the very least, you need to pay in a good amount into your savings account for it to be worthwhile, especially when it could cost a good amount to set up in the first place.
Book your free mortgage appointment and talk to a trusted mortgage broker in Sunderland today, where you will benefit from expert mortgage advice in Sunderland on the topic of offset mortgages and how they could work alongside your mortgage journey.
So now you’ve saved up for your deposit, and now it’s time to get prepared for a mortgage! We’ve compiled a list of some helpful Mortgage Advice in Sunderland, to ensure you’re as mortgage ready as possible.
The first thing you should always aim to do is get an up-to-date credit report, even before you come to a Mortgage Broker in Sunderland for mortgage advice. It’s a good idea to pay off any outstanding payments you have, even if you’re holding off based on matters of principle. This way, you’ll have less going against you, increasing your chances of getting a mortgage!
A good tip is to make sure you’re on the voter’s roll, as that has a positive effect on your credit score. Closing down old credit cards also seems to help. Your Mortgage Advisor in Sunderland will run through your credit report in the early stages, advising on what you could do to make sure your credit score looks great!
At the start of your home buying process, you’ll be asked to provide some photo ID. Our customers usually bring a driving license or passport to help with this. Your driving license can be quite handy for your address, too, although you can only use it for one of the options, so if you’re using it for photo ID, you’ll need something else to assist with proof of address. Any non-UK nationals now residing in the UK will need to show us a copy of their Visa also.
You’ll also need some documents that evidence where you live. The normal go-to for these is a utility bill or original bank statement that has a date of the last three months. Alternatively, as mentioned above, if you’re using a passport for photo ID, you can use your driving license as proof of address too.
Your bank statements should evidence your income and regular expenditures. It’s preferable if you don’t gamble leading up to this, as the lender may hold this against you. The same goes for going past overdraft limits and letting direct debits bounce – This is all about getting prepared.
Most lenders will ask to see your bank statements, as they like to be confident that you take your finances seriously. The bank statements usually needed are the ones that show your salary going in and your bills going out.
You will have to prove you have the funds in place for the deposit and evidence this for anti-money laundering purposes. It’s always best practice to limit moving money around your various accounts, as it makes evidencing the audit trail more difficult. Lenders prefer to see your savings building up, so you’ll need to account for any large amounts that have been transferred into your accounts recently.
Nowadays, deposits are gifted by family members and are the most popular way forward for first time buyer in Sunderland. These need to be also evidenced, with the “donor” needing to sign a letter confirming it’s non-refundable.
The most important thing when it comes to affordability is proving your income. This is often your last three months of payslips if you’re employed, with some lenders needing to see your most recent P60. Lenders may also consider regular overtime, shift allowance, bonuses, and commission. If you have more than one employer (maybe you have a part-time job or are self-employed), lenders will also accept earnings from those.
These days, many applicants are self employed in Sunderland and seeking fast and friendly Mortgage Advice in Sunderland. Self-employed applicants will need help from their accountants to request their last 2-3 years’ proof of earnings from the Revenue. Our Mortgage Advisors in Sunderland can talk you through what to download from the Government Gateway if you’re in control of your accounts.
It’s always a good idea to do your homework and write down an estimate of what your outgoings might be after you move to your new home. It can help you work out how much your council tax and utility bills will be, plus regular expenditures like food and drink. It’s also able to show how much disposable income you’ll have available to pay your mortgage. We’ll send you our version of a budget planner before we go forward with our appointment, which hopefully can help you with this.
As you can see from all of the above, it’s not easy to get prepared for a mortgage, although it’s still achievable! If you put in the hard work from the start, staying patient, and being careful, things are a lot more likely to go your way!
A gifted deposit can either be a portion of the full amount of the deposit that is gifted to you, with an agreement that it is not a loan and you don’t need to repay the money.
Gifted Deposits are useful when you can afford your monthly repayments but can’t afford the initial deposit. The more gifted deposit available, the better the rates you could possibly get from a lender.
This can also be helpful if you’re on a lower salary and can afford the monthly mortgage repayments but are having trouble saving your initial deposit.
Generally speaking, it is your parents who can gift you the deposit. This includes both birth and adopted parents, as well as carers (dependent on the lender). You may see this referred to online as the “bank of Mum & Dad”.
There are other potential family members who could also be considered when looking at utilising a gifted deposit. The options here vary between lenders so require a lot of care when trying to find the right mortgage lender.
We find that clients often don’t have a clue that they can actually have help with a mortgage from their parents, or don’t feel like they can go to them for help. In truth, most parents are more than happy to help their children find their footing on the property ladder.
Statistically, taking out a mortgage is more beneficial than renting, due to the potential of paying less per month. The deposit can regularly come from inheritance, although parents have been known to gift it earlier on in life if they already have a substantial amount saved or have released a certain amount of equity from their home.
The majority of lenders won’t accept a loan as a means of paying your deposit. This is because it leaves the lender uncertain that you’d have enough disposable income to pay back both the loan and the mortgage at the same time.
There is no maximum limit on the amount of gift you can receive although there have been known lenders that insist you put in at least 5% deposit from your own funds.
Those who would benefit the most from this tend to be first time buyers and home movers. It can also be handy when in conjunction with the Help to Buy Scheme, as the required 5% deposit, depending on the lender, can be paid via gifted deposit.
For the most part, all lenders will require a gifted deposit form. Depending on the lender, you may be asked to provide additional proof and ID (things like donor ID or bank statements).
A 95% mortgage is as simple as the name would suggest; you are borrowing against 95% of the price of a property, and then you are covering the remaining 5% with your deposit. An example of this is if you looked at buying a property that was worth £150,000 with a 95% mortgage, you would be putting down £7,500 as your deposit and borrow the remaining £142,500 from the lender.
Off the back of the March 2021 Budget, Boris Johnson announced a Mortgage Guarantee Scheme for mortgage lenders, making 95% mortgages more readily available from the bigger high street banks.
This is fantastic news for First-Time Buyers and Home Movers alike, as this scheme will continue running until December 2022. Certain terms and conditions will apply though, which is something your Mortgage Advisor in Sunderland will be able to look at, to see if you qualify.
All our customers who opt to get in touch will receive a free, no-obligation mortgage consultation where one of our dedicated mortgage advisors will be able to make a recommendation on the best possible route for you to take.
95% mortgages are usually accessible by both First Time Buyers in Sunderland & those who are Moving Home in Sunderland. Whilst saving for a 5% deposit sounds like a pretty straightforward concept, you’ll still need to have an acceptable credit score and prove that you are able to afford your monthly mortgage repayments, in order to access a 95% mortgage.
A good credit score is essential in the process of obtaining any mortgage, especially a 95% mortgage. Things like paying any current credit commitments on time, ensuring your addresses are updated and checking that you’re on the voters roll, can all help with your credit score.
Affordability is another one that is important to take note of. By giving the lender details of your income and monthly outgoings (things like your bank statements will be necessary for this) and any pre-existing credit commitments, your lender will be able to get a general overview of whether or not you are able to afford this type of mortgage.
Nowadays we see lots of family members helping each other get onto the property ladder, especially parents looking to further their children’s lives. The way this usually happens is by gifting the person looking to find their home, the deposit required. Known through the industry as the “Bank of Mum & Dad, Gifted Deposits are only intended to be a gift, and not as a loan. The lender will need proof that this has been agreed, before it can be used towards your mortgage.
When looking for a 95% mortgage, you want to make sure you have the right type of mortgage. Each mortgage type works differently, with that choice allowing you to find one that is most appropriate for your personal and financial situation.
Some homeowners and home buyers prefer Fixed Rate or Tracker Mortgages, mortgage types which mean you either keep interest rates at a set amount for the term given or have your interest rates tracking the Bank of England base rates.
Alternatively, you might find that Interest-Only or a Repayment Mortgages are more your style. Interest-Only allows cheaper payments until you need to pay a lump sum at the end (mostly now used for Buy-to-Lets), whereas a Repayment mortgage (a normal mortgage if you’d like) means you’ll be paying interest and capital combined per month.
Seeing as a mortgage is such a large financial outgoing, you need to be prepared and need to be aware. You might find things like higher interest rates, remortgaging difficulties due to less equity and then negative equity all cropping up if you’re not.
There is no need to worry though, as all these can be avoided if you’re savvy enough with your process to begin with. The more deposit you put down for a property, the less risk the lender will see you as.
A larger deposit, of say 10-15%, would not only reduce the rates of interest by a noticeable amount, but would also give the property more equity and reduce the risk of negative equity, thanks in part to you borrowing less against the property.
So, whilst the risks may seem intimidating, planning ahead and saving for a bigger deposit to access something like a 90% or even an 85% mortgage will be a massive help in your mortgage journey and something you’ll be able to reap the rewards from in the future.
The right to buy scheme can allow local authority tenants who live in England, to purchase their property from the council for a discounted price.
The terms of this mean you are eligible if you have spent at least three years (not always continuous) renting from the public sector rather than privately renting, and are secure tenants of that property. If you are in fact eligible for the Right to Buy Scheme in Sunderland, the property will be valued at the full market price, with a government discount applied onto it.
The discount percentage will be entirely dependent on different factors, such as where you are in the country and how long you’ve been renting from your local council or housing association. A big advantage of the Right to Buy is that due to the discount, there will usually be existing equity in the house before you’ve even bought it. How much equity again depends on some factors, such as how much your discount is and how much the property is actually worth.
We often find that those who look to use the Right to Buy Scheme are first time Buyers in Sunderland. We love working alongside First-Time Buyers and work hard to support you throughout every step of the process. This starts with your initial inquiry, all the way through to mortgage completion.
Working out your monthly outgoings will be of a great benefit to you if you are thinking of buying your rented home from the local authority in Sunderland.
Our recommendation is to work out what you have now as a tenant, then compare that to what it would be like if you were a homeowner. We are more than happy to walk through this with you and ensure you can comfortably afford to proceed with it.
As a fast and friendly Mortgage Broker in Sunderland with a lot of experience dealing with these mortgage types, we can look through 1000’s of Right to Buy mortgage deals on your behalf to make sure you walk away with the most appropriate deal matched to your circumstances.
Throughout the whole process, we’ll offer continuous help and guidance, answering any questions you may have along the way. We even have the ability to provide help with other local services when needed, such as referring to conveyancers.
Our brilliant team are proud of the service levels they provide day in and day out – This is reflected in our genuine customer reviews.
If you are applying for a mortgage, having a high credit score can make it more likely to get accepted for a mortgage and this is especially the case for first time buyers in Sunderland. Lenders will have a thorough check of your application to make sure that you can manage your monthly mortgage payments.
Keep in mind that there is no guarantee that you obtain a mortgage. You will find that find every lender has their own different lending criteria, meaning that you may not match every single of them.
Because of this, you may be unsure of which mortgage product to go for – this is where we come in. As an experienced mortgage broker in Sunderland, we can provide you with a tailored recommendation based on your financial and personal circumstances as well as your mortgage goals.
Approaching a mortgage broker, like ourselves, will give you the chance to speak to a mortgage advisor in Sunderland who will ask you a series of questions to build a picture of your financial situation in order to find you the most appropriate mortgage deal
Your credit score can play a big role in getting a mortgage which is why we will always be available to provide insight on ways to improve your credit score and help you find the perfect mortgage deal.
If you are looking to get a more detailed insight into your credit, check out the wide range of credit scoring agencies like Experian and Equifax. Prior to making a decision, research each agency it is possible that they could be keeping incorrect data and could help you find any inconsistencies.
Improving your credit score can be challenging, but here are a few more straightforward ways of going about it:
Making multiple credit searches could harm your credit score. Price comparison websites will also damage your score, so be extra careful. We also advise you to not apply for credit during the mortgage process as a lender may look at this and think that you are struggling financially.
It is a good thing in the long term though as it shows that you can pay recurring payments.
Another way to improve your credit score is by registering for the Electoral Roll. In the lender’s eyes, it shows stability which they want to see. When enrolling, you must spell your name correctly and set your address to your current one and not an old one.
If you are not registered, then you definitely should as it’s quick and easy to set up and it could help improve your credit score. Make sure everything is correct.
Maxing out your card each month is bound to reduce your credit score. The lender looks at your credit card statements to check whether you have paid off balances by the due date or not. If you are meeting due dates and have never exceeded overdraft limits.
Then a lender will see that you can manage your finances quite well and it could prove beneficial towards your application.
However, if you don’t manage your finances carefully, then the lender will believe that you don’t take payments seriously, hence making your chances of being accepted by them low.
We sometimes find that people who have moved house have not told their previous credit provider. It means that on their records, you still live in the other property.
So there are two separate addresses/properties linked with your name. Again, make sure you are on top of this as lenders don’t like to see your address history all mixed up.
Do you have a family member or ex-partner connected to your financial commitments?
You might not even know if you do, but it’s worth checking to be sure because you can’t get the economic association removed if the account is still live. If you are trying to remove any of these links. Then you should contact the credit reference agencies and make a request.
Applicants see credit scoring as being an unfair approach to accessing whether they can get a mortgage or not. Lenders disagree as this method provides a faster, fresher approach to the credit scoring system. It’s also a lot cheaper for them, and it gives always provides a result that they can trust.
If you want to get ahead of the game. You should send an up-to-date copy of your credit report to your Mortgage Advisor in Sunderland. Starting in advance will increase your chances of being accepted the first time. The more that your advisor knows about your financial situation, the better.
Also, there are still some lenders that will want to do the process the old-fashioned way and will prefer a manual approach. They will have specific rules that they stick by about the number of defaults and CCJ’s that they will allow.
We often see that first time buyers in Sunderland may find themselves in competition with other first time buyers. With this being the case, we always recommend that you put yourself in the best possible position to have any offers you make accepted.
A sad truth is that a cash buyer will always win! You can have everything you need, but if the seller can avoid the process by having the house bought outright, they’ll almost always take that option. This can be the case even if that cash buyer is offering slightly less.
Luckily for you and your property owning dreams, this is not a common occurrence. Sending the estate agent a copy of your mortgage agreement in principle is your safest option to speed up your mortgage process.
By following this option, you may also find yourself one step ahead of other potential buyers who have yet to get their AIP arranged. An Agreement in Principle can be arranged and presented within the same day if your case is straightforward.
Firstly there may be a lot of back and forth negotiation to purchase a property. Be wary of your first offer! If it is accepted immediately, you have likely gone too high – No seller will turn down more money than they had planned for! It’s always a good idea to offer less than you’d be happy to pay, so you have some negotiating room. Estate agents like to push you to pay more, so that is something to look out for.
On top of this, if the seller is sticking to their original asking price, it is up to you whether or not you are willing to meet their asking price. If the property you are applying for has only recently been put on the market and negotiations with the estate agent are falling flat, then you may need to cut your losses and look for somewhere else.
Lastly, don’t worry about how high or low the asking price is. There are strong, reliable sites out there such as Zoopla and Rightmove, who draw their information from the Land Registry and can give you an accurate idea of how much a property in that area is actually worth. From time to time, you may see a house on the same street with a much lower price than the one you are looking at purchasing. There will be a specific reason that this house sold for less than the one you are after.
As part of our service as a mortgage broker in Sunderland, we offer expert mortgage advice regarding your offering strategy. We know that this process may be nerve-wracking. However, it can also be exciting, and we are here to help you through your mortgage journey. Get in touch and we will see how we are able to help you.
100-125% mortgages are a thing of the past now. The country seems to be in a more stable, secure financial state post-Credit Crunch and the property market is back in full swing.
With many more rules and regulations set in stone, mortgage lenders are now more confident when it comes to offering 95% mortgages.
95% deals aren’t the only ones available though, it can. The more deposit you have available to put towards a property, the less you have to pay back, and you open yourself up to more competitive interest rates.
Deposits also act as a safety net for mortgage lenders. The reality is, they need to be confident you can make your monthly repayments. If you don’t, they’re at a financial disadvantage. With a large enough deposit, lenders are able to retain some of their finances should difficulties arise.
Saving for a deposit is hard for a lot of people, we know this. The leap from renting to becoming a first-time buyer in Sunderland can be a tricky one to navigate. This is especially the case if you are already renting or have a family, as any potential savings would already be split amongst various home essentials.
As an experienced and knowledgeable mortgage broker in Sunderland, we regularly find many deposit related questions being asked. Here we answer these as best we can, in the hopes you will gain a better understanding of how deposits work regarding the home buying process.
Yes, it is! Larger deposits allow for improved interest rates. From here you possibly open yourself up to lower mortgage repayments per month, as you will also be borrowing less for your new home.
As touched on in the previous section, higher deposits put you at a lower risk the lender should things not go as planned, which really does work to your advantage. Products are offered in bands of 5%, with the highest and most expensive being 95%.
Though it doesn’t happen often, it has been known to crop up from time to time. However, this is considered by the lender as an additional credit commitment. Because of this, the lender will grant you a smaller mortgage than the one you might have initially planned for.
The majority of lenders would really rather you refrain from this option though, especially if you are looking to borrow 100% of the purchase price.
The majority of lenders, at least the ones we have worked with, have no problem at all with members of your family and sometimes friends too, gifting your deposit.
The one who is gifting must be able to confirm that it is 100% a gift and not something you’re required to pay back to them over time. For the purposes of anti-money laundering, they may also need to provide them with identification and proof of your funds.
Given the term “The Bank of Mum & Dad” amongst home buyers and lenders alike, gifted deposits are seen a true lifeline for those struggling to get onto the property ladder. In truth, the market would look completely different if it were not an option!
For Anti-Money Laundering purposes, all applicants are required to fully evidence their funds by providing bank statements to the lender. They like to take a look at how exactly additional funds have been obtained too. Recent large cash deposits in your account can sometimes be an issue for lenders.
If you have made a large sale lately, like sell your car, you will need to provide a receipt and be able to prove that the amount it sold for matches the deposit made in your bank account.
The longer these funds sit in your account, the less hassle this is for both you and the lender. Providing an audit trail for your deposit source can often be quite difficult for home buyers undergoing the mortgage process.
If you are planning to fund your deposit by selling your current, then your proof of deposit will be the Memorandum of Sale provided to you by the estate agent. These are documents that record the buyers’ interest in your property and the terms of sale you have both agreed on.
This all depends on personal circumstance, but no, you don’t necessarily need one. If the house has been genuinely discounted by the previous home owner, your lender may accept the discount as a means of deposit.
For example, if the property is worth £150,000 and you have been offered it for £130,000, they will take the £20,000 discount as a deposit. This works hand in hand with a Right to Buy from the local authority or private landlord.
Please note that the above information is for reference purposes only and should not be taken as personal financial or mortgage advice to an individual.
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UK Moneyman Limited is Registered in England, No. 6789312 | Registered Address: 10 Consort Court, Hull, HU9 1PU.
Authorised and Regulated by the Financial Conduct Authority.
We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk
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Sunderlandmoneyman.com & Sunderlandmoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is Registered in England, No. 6789312 | Registered Address: 10 Consort Court, Hull, HU9 1PU.
Authorised and Regulated by the Financial Conduct Authority.
We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk
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