No Money Down Property

By: Parmdeep Vadesha

No money down property is a deal which is made without spending (or spending very little) money. It is done by using the money source from a different lender or investors but not your own funds.

This is also referred to as a 'no money down' loan. This can be achieved by using the facilities like a loan, credit card, 100% + mortgage, drawn down facilities, gifted deposits, loan to value lenders or re-mortgaging a property. Points to consider about no money down property are:

1) Nearly anyone can obtain a 'no money down property' deal. For example, although this can be a little difficult, people with a bad credit rating can find a number of lenders who are eager to lend, even though their rates may be higher.

2) Before the year 2000, the trend 'Buy to Let' was not set but after 2005 it has taken roots. There are various finance facilities available. One can select the one which suits and is comfortable. It is quite possible to loose a purchase if you are unable to prove to your lender that the funds are not your own.

3) One way to make a profit using no money down property is to flip the properties. In this, a buyer signs a contract for the property and assigns the contract to another buyer for profit. The buyer pays the money that has been received from the deal to the original seller.

4) Another way is the lease option. The buyer leases the property for a certain period of time at a set price to buy. The buyer will pay opt for deposit option which is non-refundable and a monthly rent which is higher. A portion of monthly rent is used to pay the principal of mortgage. This results in faster equity growth of the property. When the buyer conducts the option to purchase at the end of the lease period, the optional deposit will be deducted from the selling price. Since the buyer has equity in the house from it, he does not have to pay the down payment.

5) There are also down payment grant programs available. In these programs the home sellers pay the down payment for buyers. This strategy makes their houses more marketable and sellable. After sellers pay the down payment, the buyer never has to pay it back to the seller.

6) In buying and selling property privately, some sellers sell the property at an inflated price. This enables the buyer to obtain a bigger loan (85% of purchase price is normal). The seller then passes the difference to the buyer who pays it to his solicitor as the deposit and then it goes back to the seller. The total effect is property with no money down.

7) Some lenders offer loan to value and not loan to purchase prices. Suppose you are buying a property at £70,000 which is valued at £100,000, for example, then you get the funding for 85% of the value. As the lending is based upon the value and not on purchase price you get £85,000.

While practicing these methods if you are not open and honest with your lenders, things could go wrong and you could loose the offer of financing. So do your homework and get help as needed.

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