Joint Ventures are flavour of the month. Lenders tightened lending criteria after the credit crunch and recycling your cash became a much harder task. That inevitably means that investors run out of money at some point. There’s an abundance of money available so matching up money and deals seems an eminently sensible approach.
Unfortunately, it is not that easy if you are looking to borrow the bulk of your money from lenders. You can do pretty much what you like if you don’t want to borrow money but if you want to borrow you need to play by the lenders rules.
Lenders want to see two things: -
1. That the borrower has some skin in the game.
This means that the deposit comes from the borrowers own funds. Excepting a family gift and equity released from other property owned by the borrower, the lender wants to see that this money is not borrowed. Whether that be from a third party, loan or credit card.
2. That they know exactly who they are in a relationship with.
When you borrow money from a third party they may have rights to the property as a result and the lender does not know who they have entered in to a relationship with. Therefore, the funds need to come from the applicant(s).
It is not acceptable to leave money in your account for a couple of months then actually go and borrow the deposit from JV partners or conversely borrow the money and leave it in your account for a few months then claiming it as your own. All applications will ask where the funds have originated from and if you state it is from one source but it is actually from another than that is mortgage fraud – I make no bones about this!