House deposits?

[Ducatista]

If I were an FTB now, I'd wait for house prices to fall when public sector job losses kick in, although I know it's easy to speculate when your not actually in that position.

[Rabb]

I bought my first house in the early 90's
I saved a deposit and at that time bought a new house.
I bought a new house where the builder paid my deposit £3.5 k - result!
I then used the money that I had saved for furniture, gardens and all the household appliances that I needed to kit my house out with.

If you are interested in a new build ask then if they are willing to pay your deposit - builders are desperate to sell at the moment.

[Snowy]

I am wondering if thats just sales patter for a mutually agreed reduction in the deposit amount between buyer and vendor?

It cannot just be an agreement between buyer and vendor the lender/surveyor have to agree to the lending too.
In general you can't get a mortgage of £162K for a £170K value because that's higher than a 95% LTV which is risky for the lender.
So the mortgage lenders surveyor has to agree that the property is actually worth £180K so it's a 90% Loan to Value.

Its potentially legit although genuine "below market value" properties are usually snapped up by estate agents and their circle of friends.

If you were an estate agent and came across something genuinely 10K cheaper, you'd tell your friends, family and mates wouldn't you.
Perhaps this is a genuine tip off situation and if it's affordable there is no issue, but alarm bells ring if people claim to have no spare cash. Owning costs money beyond the immediate mortgage and you don't need to be an IFA to know about the practicalities of monthly household budgetting.

Maybe I'm getting the wrong end of the stick here. I'm only talking about the deposit thats payable at time of exchange. Most vendors ask for 10% deposit but I have only ever paid a 5% deposit through negotiation. If the asking price is £180K and the agreed purchase price is £170K, the properties value is £170K. I can't see any surveyor valuing it above £170K under any circumstances unless they are crooked. Then the deposit has to be paid at exchange of contracts. In my experience this is a negotiated amount and nothing to do with the lender. All I'm suggesting is if the vendor was originally asking for a 10% deposit i.e £17K, the buyer could negotiate a 5% deposit instead making only £8.5K to find at exchange. The buyer then has to find the balance of £161.5K by whatever means they can making the final total of £170K. The buyer pays the £170K whatever, its just a smaller amount to find as cash for the deposit.

The mortgage lender will decide whether the loan amount is acceptable to them but that should be known prior to exchange so if they are not prepared to lend that amount for whatever reason then the deal falls through anyway.

[Ducatista]

I can't see any surveyor valuing it above £170K under any circumstances unless they are crooked.

So you don't think properties EVER sell below market value when people are desperate for some reason or other?
I think they do sometimes come up however I think they would normally be referred to property investors who give the estate agent a commission for the infomation.

In my experience this is a negotiated amount and nothing to do with the lender.

The cash deposit is between buyer and seller.
The equity stake the lender requires for their LTV maximum is a matter for the lender.

The buyer then has to find the balance of £161.5K by whatever means they can making the final total of £170K.

Providing you can get a 95% LTV mortgage yes you could do that.
But a 90% mortgage on a £180K house selling below market value would be a better deal if genuine and I believe what SF is describing.
We are not in a position to judge whether the property is genuinely below market value or not, but I share your concerns.

The mortgage lender will decide whether the loan amount is acceptable to them

Agreed.
They will send a surveyor out and decide what it's worth. If it doesn't meet their LTV criteria they won't lend. We have already expressed concerns that it simply won't work, but the IFA clearly carries more weight that our concerns.
Let's hope fees for surveys etc. aren't wasted.

[Snowy]

I think in a roundabout way Lisa we are sort of agreeing with each other. I'm just trying to understand this "Gifted Deposit" term which I have never heard of before, who it is doing the gifting and where it sits in the transaction?

If you go back to SF's original post, he's saying that the difference between the asking price and sale price of £10K can somehow be taken off the deposit amount as a "Gifted Deposit".

All I see is a sale price of £170K, a deposit of £8K and a balance of £162K which adds up to the full value of £170K. So, where is this theoretical saving of £10K fit into the math because I can't see it anywhere? In my simple mind all I see is that the vendor agrees to take a cash deposit of £8K instead of £18K - the sale price is still £170K regardless of the deposit. I can't see any saving whatsover, only a difference in the cash deposit amount payable at the time of exchange of contracts.

In the original post its this bit I don't see who pays who or why:

"then you would have a theoretical deposit of £10,000 already"


OK, having done a "google" I think I understand this one now. In my old fashioned way of thinking, in a house sale transaction the property value is what it sells for, in this scenario £170K. Am I correct then, that in the gifted deposit scenario, the property value is the asking price and the surveyors, lenders, solicitors all agree that that is the case i.e £180K and make their lending calculations based on that. In this case then, a 10% deposit would be required i.e £18K but the vendor requests only an £8K deposit because they have reached a sale price of £170K which is where the £10K is saved.

Now the penny has dropped. In my terms I call this negotiation of both the sale price and the deposit amount. The term "gifted deposit" is a way of making the same saving a different way by having the market value inflated above the sale price.

God, things have changed over the last 20 years....... ;D ;D

[Col]

Reading SFs original post bizarre as it sounds and like he says 'theoretical' it is possible provided the mortgage provider is aware and the survey valuation is the £180k if it isn't then the value has been inflated and the possibility of mortgage fraud discovered. As Star is the solly SF I would take her free advice and drop this plan pdq mate.

As far as I know [which ain't much ;D ] the only 'acceptable' 'gifted deposit' is/ can be made from a 3rd party i.e. family member.

Many 'new' builds offer incentives and deposit help. An interesting way of buying a new house at a genuine discount is by buying one 'off plan' that is before it is even built but only use NHBC [National House Building Council] registered. Savings of 15-20 % can be achieved against the price of a completed home--you pay a reserve fee then somat around 10% but this gives time to organise a mortgage on a house that'll be ready in 12-18 months.

SF think very carefully and get paid for pro's advice before 'jumping in with both feet' and talk things/issues/points over with your proposed mortgage lender.

Good Luck with house hunting tho

[R6_Don]

"Am I correct then, that in the gifted deposit scenario, the property value is the asking price and the surveyors, lenders, solicitors all agree that that is the case i.e £180K and make their lending calculations based on that. In this case then, a 10% deposit would be required i.e £18K but the vendor requests only an £8K deposit because they have reached a sale price of £170K which is where the £10K is saved."

Not sure thats right, As far as im aware the deposit has nothing to do with the vendor and is dictated by the lender. So if the property is £180k and the morgage provider wants a 10% deposit then you need to pay £18k to the lender before they will release funds.

[redken1]

Scrap Trident, pull out of Libya, Afghanistan and Iraq. Pass the £30 Billion (approx) saved on to the local authorities across the UK to enable them to initiate an affordable house building programme. All contracts awarded on the proviso that the contractors take on apprentices. Reduces the benefit budget (2.5 million unemployed announced today) and gets some of our disaffected youngsters back in to work. And the icing on the cake – affordable housing which will help ease demand and may bring down the false over inflated private sector. Now what could be easier than that? - sorted

Sorry for hijacking your thread SF but I couldn’t resist it. Good luck with the house buying.

[Col]

Yes Don-in effect the vendor has lost £10k in order to sell by 'gifting' this reduction. The buyer would arrange a mortgage of £162k and the seller achieves £170k.The mortgage lender,sollys, and rics surveyor must be made aware of this arrangement and that the property is valued at £180k which is what this 'deal' absolutely depends on.

Aye up the people liberation freedom fighter is in da house ;D ;D---how ya doin Ken

[R6_Don]

My understanding of it is that if you know the person selling the house then you can work out a deal.
Agreed price for proprety £170k
Market value of the property £180k
Deposit required by lender @ 10% is £18k
Seller lends you a £10k that he will get back on completion
You add your £8k deposit
The sale goes through for the price of £180k
The seller gets his 10K back as he only wanted 170k for the house.
Not sure if thats correct or legal.