Some investors seem to be able to expand their property portfolios, extremely quickly. Some investors are buying 1 property per week or per month and yet you know they did not start wealthy, so how can they afford to buy so much property so quickly. The chances are they are probably using 2 favored techniques to buy property with minimal personal wealth. The first technique is asking the builder to pay your deposit, a builders gifted deposit.
Now we must point out at this stage that not all builders will be interested in discounting their new properties and do not be put off if 8 out of 10 say no. The property market is more buoyant in some regions than others. If builders are able to sell their houses as quickly as they are building them, then they clearly do not need to discount. If however, you can see that a builder has houses or flats built, complete and they are still for sale and there are more being prepared for sale, that scenario would suggest the builder may be prepared to reduce the price in order to sell.
If you look in your local paper, for most parts of the UK, it would be on a Thursday when the local estate agents and builders of new properties on local developments advertise, you may find some builders offering to pay a purchasers 5% or 10% deposit. This is known as a builders 'Gifted Deposit'
You will find in almost all cases the builder offers just 5% as a gifted deposit. As an investor hungry to grow a portfolio you will need at least 15% as a gifted deposit.
So I have been offered a 15% gifted deposit..what next?
At any one time there are very few lenders who will accept a 15% builders gifted deposit as your full deposit, but usually we can find one or two. Most lenders will expect you, the investor, to use at least 5% of your own money. Many lenders will merely acknowledge a gifted deposit as a discount and then expect you to use 15% of your own money as deposit. At 12and3 we accept a 15% builders gifted deposit as your full deposit.
Is there such a thing as a 'vendors' 15% gifted deposit?
Yes, this is when a person, not a builder, reduces the price of their property, we have just 2 lenders who will accept a vendors 15% gifted deposit. This is when somebody owns the property, has reduced the price to provide you with a 15% vendors gifted deposit, usually because the current owner needs a quick sale.
Are the interest rates high on these gifted deposit mortgages?
Not any more, they are marginally higher than the cheapest rates available, and do not come with extended tie-in's or interest rates that creep up. Furthermore the rental assessment can be carried out by a local letting agent rather than a surveyor, and with some products the rental is calculated at 100% of the pay rate. This makes purchasing using a gifted deposit very easy.
Can I self cert?
Yes