How to structure No Money Down Deals

Creative financing with loans
Firstly, you need to obtain funds for a deposit that is organised by applying for a personal loan (secured or unsecured). Usually a secured loan is secured on your assets and an unsecured loan is based on your income level.

Once you have received the loan, you place it as a deposit against a mortgage on the property you are purchasing.

You need to ensure that you have made sufficient provisions to service both the loan and mortgage payments to carry the finances until you sell or if renting, serviced by the incoming tenant.

Creative financing with credit cards
Credit cards can be a dangerous way to finance property purchases and would only advise investors down this road if they have complete control and confidence over their finances.

The idea behind using credit cards effectively is to use them often and pay off the balances regularly every month. This will build a high credit rating with the card companies and make you a very valuable customer. Over time you can increase your credit limit and this will open up the possibility of further loans with very favourable interest rates. The higher you credit rating, the more favourable the rates of borrowing with special promotional offers. Apply for credit cards that provide a cheque facility as this is much cheaper and can be a very convenient way to pay for refurbishments and deposits. If you maintain several credit cards in this way then you will be able increase your credit limit to a point that you can fund deposits for property purchases. Remember to spread the application of credit cards over several months as each application can show up on your credit records and can harm your rating.

Once you have been able to sufficiently increase you credit limit then you can use the credit cards to place a deposit against a mortgage on the property you are purchasing.

Creative financing with a remortgage or draw down facility
Providing you have sufficient equity in your home, you can remortgage to fund a deposit. Some mortgages have a draw down facility whereby you can release equity in your home by writing cheques to pay for purchases. The value of the cheques are then added to your mortgage. This is a great way to pay for deposits as mortgages are generally the cheapest form of loans.

Again, you can use the remortgage or draw down facility as a deposit against a mortgage on the property you are purchasing.

Creative financing with gifted deposits
A gifted deposit is a deposit (or a portion of a deposit) paid by the developer, house builder or a private seller.

A gifted deposit from a private seller will mean that he/she will need to sell the property to the buyer at an over market value. This will help the buyer to apply for a larger loan. Afterwards, the seller passes on the difference to the buyer, who then pays it to his solicitor as the deposit. This results in the buyer purchasing the property with no money down.

Creative financing with below market value property
When a property is sold at 30% below market value the buyer applies for a bridging loan at 70% LTV. Effectively, the 30% reduction will be the deposit as equity in the property. The buyer then re-mortgages for 85% of the actual value, usually after refurbishing the property to achieve an over market value price, thereby releasing the profit from the price difference.

JV partners in No Money Down deals
As discussed before if you use a joint venture partner who is prepared to fund the investment then that is also considered as no money down deal.

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