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‘Honey, I shrunk the deposit!’

bridging finance Aug 25, 2020

When you’re ambitious about your property career, but your bank balance isn’t quite ready to start buying properties, it can be frustrating.  You want to get started, but saving that all-important deposit to get started is holding you back. 

After all, there’s only so much money you can put away each month - and if you’re in a job with a family to look after, there are always expenses that chip away at your nest egg.

There are no longer ‘no money down’ mortgages available, mortgage lenders typically require you to put at least 25% of the purchase price on the table.  That means that you have a few options:

  • Keep saving and hold your impatience back. If that was a serious option you wouldn’t be reading this now!
  • Take another job with a bigger salary - or get a second evening/weekend job to boost your savings. This won’t do your work-life balance much good and might earn you some earache from your family, who somehow expect you to be around.
  • Buy much lower value properties that you can afford to put 25% down on. Good luck with that, there aren’t many around, unless you’re in certain parts of the UK - and it’s probably wise to check on the housing market in the area before jumping into that.
  • Find a (legal) way to reduce the deposit.

Clearly this last option is the most attractive.  But how?

That’s one of the things I teach on the Ninja Investor Programme.  It works like this:

  1. Identify a suitable property that you want to buy with a motivated seller who will sell well below market value.
  2. Get expert input to see if the deal stacks up.
  3. Complete an enquiry form with a brokerage (I can help you with that!) The aim is to find a bridger who will lend against actual value regardless of how much you’re actually paying.
  4. Get the bridging loan approved in principal.
  5. Lodge the deposit money with your solicitor.
  6. Exchange contracts and carry out the legal process to complete.
  7. Proceed with sale or refinance.

My rule of thumb is to keep the properties you need to refurb and sell the ones you can’t. 

By buying below market value, but getting a finance at full market value - you’ve shrunk the deposit!

 

You can learn more here:
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