Buying properties without a deposit is very much real and a trick that only very few know about.
Back in the day when Mortgage Express were lending about 30% of property investors were milking them and buying no money down sometimes even cash back! When the credit crunch hit the technique, known as bridge and remortgage, got closed down and most investors gave up after that stating no money down was impossible.
However no money down was still possible with a few lenders allowing the bridge and remortgage technique to work and other techniques such as Back to Back purchasing, assignable contracts and bridged deposit.
The amount of investors that used these techniques dwindled down to around 5 to 6% of investors.
If we look at today there are very very few techniques that actually work, that are legal and investors know about.
If I were to hazard a guess how many investors are using these techniques I would guess 3 or 4%.
This is because most have given up on the idea that you can really buy a property with no money.
They state that no money down is either: Fraud No lenders accept it The Government would not allow it Or other such negative comments.
The only way you know that none of those above apply is full disclosure.
The solicitor who acts on the transaction discloses fully to the lender what is going on.
The key question is always at the solicitor's mind whenever they are handling the transaction: "If the lender were aware of all the facts would they still lend?" Now I do not know if you know any solicitors but they are a cautious lot.
The reason being professional indemnity insurance has gone through the roof.
If they have too many claims on their insurance they will effectively put themselves out of business.
So guess what: solicitors will tell the lender EVERYTHING! If there is any doubt that something fishy is going on they will give the lender the heads up so there is no chance the lender can come back on them with a negligence claim and claim on the solcitor's professional indemnity insurance.
So if you were ever worried that full disclosure would not be applied think again.
Solicitors want to fully disclose more than you! So I hope another question is popping in your mind being this one: "Why do banks knowingly lend 100% of the true purchase price?" Now this question I do not know the answer as I am not a bank! It baffles me.
I had one of my purchases go through, I bought for £17,500 and the bank lent me £21,000.
Did they know I had bought it for £17,500? YES! Did they ever question the fact that I was borrowing more than the purchase price? NO.
Now I am going to make a guess about these banks.
They are happy to lend 100% of the purchase price because of 3 things: 1.
they like to lend 2.
it is small amounts compared to lending as a whole 3.
it is to experienced investors like I said to you earlier 100% lending is niche lending.
It is a small part of the banks lending.
They know a few investors are doing it and they know that it is the more experienced ones doing it as well.
If they were to truly evaluate the risk on 100% loans to experienced investors which I am sure they do then the risk would be the same as a high credit scoring professional with a large deposit looking to buy a home.
One thing is for sure.
Big banks: Know the risks Take on the risks Monitor the risks So you just have to think are 100% loans somehow wrong.
I know the banks do not think so regardless of what the government think.
Once you accept that within the industry 100% loans are granted in certain circumstances to certain people you understand that there is a lot to learn about this world we call BUY TO LET!