Only 5% cash deposit? A new 95% Mortgage for 2009!

Buy a house with just 5% Cash Deposit

The ‘Credit Crunch’ has had a profound effect on the housing market, with lenders now demanding higher deposits from people wanting to move, or buy their first home. However, house prices are now at their lowest levels for many years and there’s no shortage of potential buyers, so on the one hand there’s plenty of cheap housing, and on the other hand there’s plenty of people to buy them. The problem has been one of funding the deposit, or finding a mortgage, or both!

With this in mind, we have developed a mortgage in conjunction with the  UK’s leading mortgage provider where only a 5% cash deposit is required from the applicants. The mortgage itself will provide 90% of the purchase price, so where’s the missing 5%?

This is the clever bit - as we’ve already said, many people have already reduced the price of their properties to get a sale, so what we do is to use some of the price reduction, or discount, as the missing 5% deposit. This is called a ‘vendor gifted deposit’ and this can be arranged from a private individual selling through an estate agent, or from a developer on a newly built house.

Here’s an example of how it works:

Mr & Mrs Brown want to move home and have had their house valued at £179000 but it hasn’t sold so they reduce the price to £175000 to avoid Stamp Duty for a buyer. They are looking for a quick sale as Mr Brown’s job has been relocated to a different factory.

Property on the market for                                                  £175000

You make an offer of                                                           £160000 (which is accepted)

We arrange the contracts to show a purchase price of      £168425

The vendor gift is                                                                  £    8420 (just under 5%)

Your cash deposit is                                                              £    8425

Leaving a mortgage required of                                          £151575

We make sure that the vendor, the estate agent and both solicitors are happy with this and all parties are in favour of the transaction. The lender has already approved this facility for us and both solicitors are free to verify with the lender for professional purposes.

The mortgage application is then made using the purchase price of £168425 and the lender’s value will need to agree that the property is actually worth that, but assuming this is the case, a Mortgage Offer will be issued and the transaction can complete.

This is just one of many ways we are helping people to buy their home in these difficult financial times. For more information, or to talk to an adviser, call 0117 2232 050.