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Client Questions – Do Lenders accept Private Investor funds as a deposit?

private investors

This week I was asked by a property investor “Are there lenders who accept deposits from Private Investors?”

The short answer is yes, there are lenders who can accept deposits from a private investor for the purchase of a Buy-to-Let property.

What are the points to consider when purchasing using Private Investor funds?

While there are lenders who can accept deposits from private investors, the options are limited and you will be looking towards commercial banks if you wish to go straight onto a long-term mortgage.

Due to the flexibility surrounding the source of the deposit; there is a premium on the rate to consider.

At the time of posting this, we are seeing rates start from 6.74% fixed for 5 years, for lenders who can accept private investor funds as the source of deposit.

While these lenders can accept private investor funds as a deposit, they may need to see where the original source of funds came from; this can be evidenced via bank statements and a written loan agreement between you and the investor.

One consideration to factor in is the repayment terms of the private investor’s funds, will this be over the course of the mortgage or does the investor require the funds back earlier?

With the repayment terms in mind, this could determine the type of mortgage product suitable for your needs.

Will lenders accept Private Investor funds on a property that needs work?

An alternative route we are seeing our investors take when using private investor funds; is purchasing a property in need of work.

As the property requires work, it can be purchased using a bridging loan; again this would need to be placed with a lender who can accept deposits from a private investor.

Once the works are completed, you could look to refinance the property at its potential increased value to a mainstream buy-to-let lender; therefore benefiting from more competitive rates.

I reached out to our top 5 Buy-to-Let lenders and asked whether this was a scenario they would accept.

They confirmed as long as the property had been owned for at least 6 months and the ownership was reflected at Land Registry, then they could consider the refinance, even though the original source of deposit came from a private investor.

How can Advocate Finance help?

Thanks to our unmatched knowledge of the Buy-to-Let market and the excellent relationship with our 160 lending partners, we can find funding solutions regardless of complexity.

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