No money down deals

No money down deals - How to do no money down What Is A No Money Down Deal? For me a "no money down deal" is a property purchase which I make without spending any, or, with very little of my own money. It is the construction of a deal using financing from other sources. You may have to source money from different lenders / investors, but not have to use your own funds Obtaining these funds can be done by using facilities such as Loan's, Credit Card's, 100% + Mortgage's, Draw down Facilities, Gifted Deposits, Loan To Value Lenders (i.e. Bridging) or Re-mortgaging once you own the property.

Some no money deals can end up giving you cash back, if you have sourced a property below market value. It is crazy but possible!

Who Can Obtain No Money Down Deals?

Most people can obtain a "no money down deal".

Those with a bad credit rating may find it harder to do so, but, there are plenty of lenders out there who are desperate to lend.

You should consider using financing creatively. There are numerous finance facilities available. You just have to find whatever suits you, and what you are comfortable with. Not all financing is easy. Some could put a strain on your purchase, and are not accepted by some lenders. You have to decide if you want to risk loosing a purchase if you are unable to prove to your lender that the funds are, or were, not your own.

How Can I Do Deals Myself?

Example 1 - Loans An Unsecured Loan is a loan which you do not have to secure on your assets. It is usually based on proof of income. A Secured Loan uses your assets as security.

The first example for you to consider is to take out a Loan, If you do this well in advance of your property purchase, it should not look connected to your purchase. If you have held the funds for a while, the lenders will not usually question this.

You may then use this loan as a deposit on the property you wish to buy.

It is better to keep the money acquired through the loan in a clean account, should you need to show a statement to prove that you have the deposit. Some mortgage companies will not issue a mortgage offer unless they have seen proof of the deposit.

It is best to have the funds put in a different account when you receive them, so that it will show up as a transfer of your own money into the account and not show up as "The Loan Company" on your bank statement. There is a risk in using this option.

Example 2 - Credit Card A Credit Card is a facility to spend money which you can pay back at dates agreed by yourself and your lender. There is usually a higher rate of interest, but some have special offers.

Some Investors apply for a number of credit cards. They then build up the credit limits to use these funds as deposits.

A tip on how to increase your limits is to try and use each one regularly for a while.

Once you have proved yourself to the credit card company you are often able to increase your limits. After a while you can build up a considerable credit facility. You can ask for cheques linked to some cards, making it easier to release cash from them.

You may find cheques are at a lower rate of interest than a cash transfer.

If you decide to apply for lots of Credit Cards, it is best not to apply for them all in one go. Try to apply for one or two every couple of months.

Once you have a balance on your card it is a good idea to transfer it over to another card for an interest free period if this facility is being offered. You can learn to juggle, moving your balance from one card to another to take advantage of the best rates of interest available. It is not uncommon for an Investor to have around 30k outstanding on Credit Cards. There is a risk in using this option.

Example 3 - 100% + Mortgages A 100% Mortgage is usually a residential mortgage provided by a lender for 100% of the cost of your purchase. It may sometimes include your solicitor's fees and MIG (Mortgage indemnity Insurance).

One of the easiest ways of undertaking no money down deals is with a regular residential mortgage. You can obtain 100% to 125% residential mortgages from some lenders, and there is no limit to how many residential mortgages you can apply for, although you will have to declare them to new lenders. Some lenders may have limits as to how many mortgages you can have with them as an individual lender. Often, lenders are underwritten together by a larger bank.

You must intend to live in the property in order to obtain a residential mortgage. You can build up your portfolio by buying a property, move into it, then, when you have been there a few months, buy another one, and another, each time obtaining residential mortgages, but converting the one you move out of into a B2L (Buy To Let) or commercial mortgage. Lots of successful investors have used this residential method.

Sometimes, when you apply for a new mortgage they may call it a let to buy (i.e. you are letting your current residence to buy another) Moving house every few months may be your cup of tea. You could in this case buy a property with the intention to live in it, and then if your circumstances changed, you would convert the one you had just bought into a B2L or Commercial Mortgage.

Some lenders may wish to see proof that you intend to move into the property you are buying in the form of a letter from a local letting agent that quotes the rent you would achieve if you moved from your current residence.

When applying for a residential mortgage with the intention of letting the property, you will need to check to see if they will allow you to let your property. Some of the CAM (Current Account Mortgages) will not give permission for you let out your property and this should be clearly stated in your application. You should always check before you use a lender, as you may incur charges. It is possible, that with your application you will receive a list of possible charges for services, and on this may be a charge for admin or permission to let. Check what commercial rates of interest are, as you may have to pay a higher rate when permission has been granted. This is fairly normal.

You may have to prove to your new lender that you have permission to let on your other mortgages, especially the one you are living in. They may also ask if your other mortgages are B2L mortgages, and in this case if you have been given permission to let then they are now B2L mortgages.

It is really not advisable, under any circumstances, to let a property without gaining permission from the lender. Your insurance may be invalidated if you do not seek permission. It may show in your favour if you have permission to let, that you are a good client for future lenders. There is a risk in using this option.

Example 4 - Draw down Facilities A Draw Down Mortgage is a facility whereby you can have a cash release system (i.e. cheque book or current account) linked to your mortgage account.

Draw down facilities are available on your current residential mortgage in some cases.

This will enable you to release equity when you need to. There are several different types of this financing.

There is a facility called "Rollover" financing, where a lender puts all of your property in one pot, and offers you a draw down facility on a percentage of your total equity.

This is quite new financing and may mean you need lots of equity in your current property.

Speak to a broker or IFA (independent financial advisor) for current lenders and deals.

Example 5 - Gifted Deposit A Gifted Deposit means that someone has given you, or paid the deposit on a property you are buying from them.

Builders sometimes offer gifted deposits on new developments. They usually offer to pay 5%. Some lenders will accept a gifted deposit from a builder, but they prefer to see some commitment from you.

If buying and selling property privately, there is also a scenario whereby the seller will sell the property to the buyer at an inflated price. This then enables the buyer to obtain a bigger loan (85% of purchase price is normal) Then, the seller passes on the difference to the buyer, who then pays it to his solicitor as the deposit, and it then goes back to the seller. Effectively, the buyer buys his property with no money down.

Another way of using the gifted deposit is where the seller sells at 30% below market value. The buyer obtains a bridging loan at 70% LTV (so no money down) The buyer then re-mortgages for 85% of the actual value, possibly after a lick of paint, thereby releasing further funds to give to the seller.

You can work with other people to do this. Find property below market value, another investor footing the deposit, whilst you obtain bridging finance at 70%. You then tidy up and re-mortgage for 85% of the new value and you give the investor back their deposit plus half of difference between 70% and 85%. This can be quite a good way to work if you don't have much money, but have time to source property & negotiate.

And, it is still a no money down deal for you. There is a risk in using this option.

Example 6 - Loan To Value Lenders Some lenders will lend LTV (Loan To Value) and not loan to Purchase price. There are only a few lenders who do this.

This means that if a property is valued at ÂŁ100,000 and you are buying it at "say" ÂŁ70,000, you should be able to get funding for 85% of the value. That would be ÂŁ85,000. This is because the lending is based on the value, and not the purchase price.

Securing no money down deals here works by you sourcing a property below market value - aim for 15% or more below.

Example 7 - Re mortgage as soon as you have bought property If you have sourced a property and it is worth more than you paid for it, it is possible to re-mortgage it as soon as you have bought it.

You obtain your first mortgage / loan, which is usually based on purchase price.

Whilst you have almost completed the purchase, run a second application alongside the original application, based on owning the property already and also based on value and not purchase price. You will need to ensure the completion of the second application happens after you have bought the property though. Once you own the property under the first financing, you can then complete on the refinancing. This can also apply if you have bought a property and done some work on it, thereby increasing its value.

What are the implications of doing any of the deals?

With some of the deals, as I have stated "There is a risk in using this option. " If you are not totally open and honest with your lenders, things could backfire on you

and you could loose their offer of financing. Lenders prefer you to have supplied your own funds from savings, they rarely they ask for proof, but, if they do, it's usually that they just wish to see a statement from your bank showing the funds. You can sometimes get round this by depositing the funds with your solicitor, and they will confirm to the lender that they hold the funds in their account.

This page is not a recommendation of any deals. This page is to make you aware of how some investors use creative financing.