If you are planning to buy a property, there are several options to consider, including using the Bank of Mum and Dad, getting a mortgage, or leveraging the equity you have built up in your current property. The option that’s best for you will depend on your financial situation, your goals, and the specific circumstances of your property purchase.
The Bank of Mum and Dad refers to receiving financial help from family and friends to fund a home purchase. This can be a great option if you don’t have enough savings or assets to cover the cost of a home, but it’s important to ensure that the arrangement is structured in a fair and safe manner. If you are considering this option, it’s a good idea to seek advice from a financial advisor or solicitor.
Getting a mortgage is another common option for homebuyers. If you don’t have savings, you may still be able to get a mortgage, but you’ll need to pay for Lenders Mortgage Insurance (LMI) if your deposit is less than 20%. The cost of LMI can be substantial, so it’s important to consider this when applying for a mortgage.
If you already own a property, you have more options available to you. For example, if you are not selling your current property but looking to buy a second home or an investment property, a home equity loan may be a good option to consider. A home equity loan allows you to use the equity you have built up in your primary residence to purchase another property. However, it’s important to keep in mind that a home equity loan is a form of secured debt and your primary residence will be used as collateral. Additionally, the interest rate on a home equity loan may be higher than a traditional mortgage.
If your property is under an unconditional offer, you may also consider an early deposit release or a pre-settlement advance. An early deposit release allows you to access the buyer’s deposit before the settlement date, while a pre-settlement advance provides you with funds quickly and is typically available up to 80% of the property value. If you need access to funds earlier in the process of selling your property, you could consider vendor-paid advertising, which allows you to postpone the cost of property advertising until the sale is complete.
Finally, if you need to raise funds quickly for unexpected expenses such as property repairs or renovations, you could consider a bridging loan. Bridging loans are designed to bridge the gap between the sale of one property and the purchase of another. However, it’s important to keep in mind that bridging loans can take several weeks to approve and generally run for a shorter period than a mortgage.
In conclusion, there are several options available to help you finance your property purchase, including the Bank of Mum and Dad, getting a mortgage, leveraging equity, early deposit release, pre-settlement advance, vendor-paid advertising, and bridging loans. Consider your financial situation, goals, and specific circumstances when choosing the best option for you.