Buying a home is one of the single biggest investments anyone can make. It places you squarely on the property ladder and automatically converts you from a tenant into a landlord. Home ownership is a dream that many people have. It is safe to say that no one wants to be a tenant all their life and, so, many people struggle to realise their dreams of buying their own home.
In the UK, buying a home is divided into two stages. The first stage is where you show interest in a home and exchange contracts with the seller. You show proof of your commitment to the purchase by putting down an initial deposit. Depending on where you are, this deposit can be anywhere from 10% to 25% of the total cost of the property. The second stage is when the balance is paid, and the keys are in your hands.
The process looks simple enough but, unfortunately, a lot of people risk losing their deposit due to financial constraints.
Normally, the person buying the property will seek alternative sources of funding including applying for a mortgage, a process that has to be completed and the money secured before the time agreed upon by the buyer and seller. However, due to conditions outside the control of the buyer, his or her mortgage may not be approved. There are dozens of reasons why a mortgage application can be turned down and this can cause the buyer to miss the agreed deadline.
In a situation where the buyer has paid a deposit but cannot complete the payment on the date agreed upon, the deposit ends up being forfeited and retained by the seller who can then remarket the property. A lot of people have found themselves in this or similar situations in the past.
There are several ways you can save yourself the risk of losing the initial deposit on a property. A good idea is to first confirm your source of funds before committing the initial deposit. In a property transaction, the seller expects the buyer to carry out some form of research and due diligence before making a financial commitment. This can happen within a period of weeks, at most 6 weeks. This is enough time to find out if your mortgage looks likely to be approved, or to source other means of raising the money you need. However, if you have already made the deposit and find yourself at risk of losing it due to delay or inability to raise the required capital, you can always opt for a bridging loan.
Lots of property buyers apply for bridging loans to help them meet their payment deadline while working out other means of raising money. This system provides an opportunity for people to raise the funds they need temporarily, until they can get the mortgage or regular loan to repay it.
When planning to buy a house, it is vital that you do all you can to meet the payment due date. This is even more important if the deposit you paid is less than what is stipulated in the contract. In this situation, the seller may require you to make up the balance even though you cannot afford the property.
When buying a property, make sure to dot the Is and cross the Ts so that you don’t lose your hard-earned money due to circumstances outside your control.