We all need a little help from our friends every so often – but could our mates help with the purchase of our home? Joe Capon of The Mortgage Bubble offers words of wisdom to a first-time buyer looking for a deposit boost
The Question
I have been planning to buy my first home and was due to start the process a few months back when I was made redundant and have had to use all the money for my deposit on living costs. I am now in a position where I have very little savings and therefore was thinking of putting my homeownership plans on hold.
However, a friend of mine has offered to help me out by providing the deposit. She said there may be way she can ‘invest’ the deposit in the house rather than loan it to me. She has her own property so will not be moving in with me.
My question is firstly, is there a mortgage or homebuying option which will allow my friend to help and, if so, are there any rules or criteria?
Joe’s Answer
It is very nice of your friend to invest in your property by providing the deposit, however I would proceed with this option with caution.
As your friend is not an immediate family member, you will be limited to mortgage lenders as they would want the deposit gifted to you from a family member.
You would also need to think about this: does the money your friend is investing come with any terms and conditions? For example, will you need to make a monthly payment, will they hold a charge on the property and so on?
As your friend owns their own property, were they to be included as an owner of your home with you, this would attract additional stamp duty.
At the same time, your friend will also need to protect themselves especially as they are investing the money and are not gifting the money to you, I would advise they receive independent legal advice.
There are mortgage options where you can look to buy a property with a 0% deposit, I would advise looking into that first, and getting advice from a mortgage adviser on the options available to you.
Meet our expert
Introducing Joe Capon of The Mortgage Bubble, who is ready to answer your questions…
Joe Capon has more than 10 years’ experience in the mortgage industry. He set up The Mortgage Bubble in 2021 and it is now a multi-award-winning mortgage firm, which strives to deliver the best mortgage advice to its clients which meets their needs now and also in the future. If you have a question for Joe email our editor and she’ll pass it on to him – kate.saines@emap.com
