If you want to buy a home then you will need to find a mortgage in order to pay for it in most cases. Very few people are able to afford to buy a house outright without having to borrow money. A mortgage can be a great help as you will get a majority of the money that you need. However, you will also find that with most mortgages you will need to pay a deposit so that you can get the money that you want.
Why pay a deposit?
It can be hard to understand why the lender might want a deposit. However, there are a few reasons that they want one. Firstly, it will show that you are responsible with money and can save up the money required. But the mortgage company also wants to protect themselves against the home falling in value. This is because when you first buy a home, you will not have repaid very much of the money you borrowed. If you cannot make repayments, they will repossess the house and sell it to make back the money that you owe. If the house goes down in value or even if it stays the same, they may not be able to get back all the money they are owed, once they have taken out their costs and the costs of selling. This means that they would rather not lend you the full value of the house.
It can also be better for you as a mortgage payer to borrow less money. If you can save some up first, then you will borrow less and your repayments will be lower. You might be able to repay over less years or just repay less each month. You may even be able to make overpayments and be able to repay the mortgage more quickly. Do there are advantages to you as well if you have a smaller mortgage.
How to raise the deposit money?
Raising the amount needed for a deposit can seem very daunting. This is why some parents set up trust funds for their children when they are born and put money into them regularly so they can use that money when they need it. However, not everyone gets help like this and so they will have to figure out how to do it themselves. Most people will save up money each month until they have enough. They will reduce their spending and increase what they earn so that they have spare money available to save each month. By setting up a direct debit to transfer savings into an account when they get paid, they will not be tempted to spend the money on other things. Some people use a Help to Buy ISA which is a government incentive to help people to save for a house deposit.
However, what do you do if you find a property that you really like and you do not have a deposit or maybe not enough deposit to pay for it? You might decide that borrowing the money could be the best idea. However, you may wonder what type of loan to get for this. It might not be a good idea as your mortgage lender will look at the loans you have and may decide that you cannot borrow for them as you already have a loan. However, if you wait to get the loan until the mortgage is secured then you might be able to get away with it. A guarantor loan could be a good option for this as you can borrow a large sum of money and very quickly.
Is a guarantor loan a good solution?
With regards to the speed that it takes to arrange the loan via someone like HappyPenguin in the UK, then a guarantor loan could seem like a good idea. It may work well for some people, but you will need to think about whether it will work for you. Firstly, you will need to work out how much it will cost you to repay as you will need to find the money to repay this, make your mortgage repayments and cover all of your other bills as well. It is wise to calculate how much you will need so that you can work out whether this will be something that you can afford.
To get a guarantor loan you will also need to find a guarantor. They will need to be a person with a good credit record who is willing to help you out and pay any repayments that you miss. Some people will immediately be able to think of someone that will be able to help them with this but for others it could be more difficult. It will depend on what the people you know are like, what their credit status is like and whether they are likely to help out.