How Do I Raise The Deposit For My Buy to Let Mortgage

I had a great question in about how to raise the funds to pay for a deposit for a buy to let property. The actual specific question was ‘are there any commercial lenders out there who’ll lend me the deposit for my buy to lets?’. Now, sadly it doesn’t work like that. What you’ll find is that most, if not all, and it probably is all, buy to let lenders do not want you to use borrowed funds from a third party for the deposit on a a buy to let. So if you take out a 75% loan to value (LTV) mortgage, for example, the bank will give you the 75%, but you will have to put in the 25% as what we call a ‘deposit’. So, let’s just have a think about where we can find that ‘deposit’ money. Now, the first thing is some lenders, not all, but some, in fact I’d go as far as to say in good times many buy to let lenders would be quite happy if you took equity out of your home or out of another buy to let property and you could use that for your deposit. That sounds a little bit back to front because I’ve just said they don’t like you using borrowed funds, but as long as you are borrowing effectively from yourself, because it’s your equity in your home or it’s your equity in your other investment properties, many, but not all, lenders are ok with that. So you could use equity, released equity. Of course, you could use savings if you’ve got savings. If you’ve got other investments such as stocks and shares you could sell those. Another way to get a deposit, which some people use is to use a gifted deposit. A gifted deposit, as the term suggests, is meant to be a gift. So, it’s a gift from somebody like a close relative, like a parent, or grandparents, and most buy to let lenders will allow you to use a gifted deposit. A solicitor, when arranging the conveyance, will ask you to sign a letter confirming that it is a gift and not a loan, and that there’s no intention to pay that money back So that’s just one thing to be careful of. How else could you raise the money for a deposit? Well, strangely enough you may actually jump ahead in the process because, strange though it may sound, it’s usually easier to borrow 100% of the purchase price of the property rather than going for the 25%, depending upon who you’re approaching to borrow the money from. So you could borrow 100%, for example, from a friend or a relative, or a business partner, or a JV partner, and buy the property outright. If you follow the Buy Refurbish Refinance model you can then add value, and then you can refinance and pay your JV partner back. Do the banks mind doing that? No, the banks don’t mind you doing that, as long as there’s enough equity in the property once the refurb or the added value has been completed. As long as there’s enough equity in the property they’ll be quite happy to lend you the amount which will hopefully be a good contribution to paying back your JV partner, your friend, your relative, or whoever it is you did the deal with. So those are just a few very simple ideas. The last idea was perhaps a little bit more sophisticated, maybe not quite for a beginner, but something to aspire to, and I hope you found that helpful. Here's to Successful Property investing Peter Peter Jones (ex) Chartered Surveyor, author and property investor http://www.ThePropertyTeacher.co.uk PS. By the way, I've rewritten and updated my best-selling e-book, The Successful Property Investor's Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch and with no money of my own, and how you can do the same. For more details please go to: http://www.ThePropertyTeacher.co.uk/the-successful-property-investors-strategy-workshop