House deposits?

[Squashed_Fly]

Anybody else in the position of trying to save 1st house deposits?

Seems like a never ending task, but we spoke to a friend the other night, who is an IFA, that said you can get what's called a gifted deposit to make the initial amount needed much less.

Works like this - house is on for £180,000 so your 10% deposit is £18,000. However, very rarely do you pay window price, so whatever your offer is below the asking price, the difference can be counted towards your deposit. If you had an offer accepted at £170,000, then then you would have a theoretical deposit of £10,000 already, meaning you only need to save £8000 to get your 10% which is a much less 'impossible' target. On that basis, you would be paying 8k deposit and only borrowing £162k which for us, would be afordable. Will still take 18 months to save that, but it's not sooooo far in the future that you think it's not worth starting.

I thought I'd share it as I'd never heard of it before. But Mike said that's the difference between an IFA and going straight to a lender who can just say no. The IFA's know lots of different routes to getting there so it's not such an impossible dream!

I never thought a few years ago, that at this point in my life I'd be getting married, planning for kids and saving for a house deposit! It means I might finally have to start growing up!!! ;D


If anyone else is in similar situation, happy to pass on Mikes details and he may be able to help you out as well

[Dabz]

Sounds very interesting!

I'm a bit of a stickler for tradition unfortunately - I managed to save £25k on my own for a deposit, and have paid off a further £10k since moving in 2.5yrs ago through VERY hard saving. Started saving for a house when I was very early 20s and stuck to being strict and careful with money for about 6 years.

Did effectively cause the breakup of a 5yr relationship mind you! She hated me saying "I haven't got any money left this month" when in actual fact I meant "..after having put my usual amount in my house fund"

[Squashed_Fly]

i wish I had been - I'm a late starter for saving, so gets harder with all the other outgoings. Jen is good though, she always has been so she's [trying to] keeping me on the straight and narrow! lol

[Crosbie]

I managed to buy my first house 2 and a half years ago (when the recession was first hitting hard I guess). Sold a car I had for 6K and got an old banger in PX. That was my deposit for a house sold to me at 94K - LTV of 95% resulted in an extortionate interest rate (7.14%) When I made the decision to buy it took me less than 6weeks to decide on the house, sell the car, sort the mortgage and move in!

I don’t really know much about the gifted deposit you mention, but the lender will always send a surveyor out to value the property so you are in their hands really (just remortgaged myself so I know!)

The best advice I can give - obviously save as much as you can as the rates and deals will open up a hell of a lot more.

Any fees you have to pay associated with surveying, arrangement fees, solicitors and even moving property if renting - take out a credit card with an interest free period - there are lots out there at the moment with 15 months interest free so you just pay the minimum each month and extra when you can. Just make sure you can pay it off before the offer ends. If you bolt these prices onto the mortgage it will count against you LTV ratio (loan to value)

Don’t fall in love with the house you are looking to buy - you will get a much better deal if you don’t as you won’t get clouded vision and offer more than you could potentially buy it for (it is a real buyers market out there and will be for the foreseeable future) Buy somewhere that needs a bit of tidying up and TLC and you will make your money back. I know as like I said I brought mine for 94K 30 months back and just had it revalued by a new lender and estate agent and the prices came back at 120K and 130K respectively which now means my LTV is at worst 76% and at best 70% which has allowed me to remortgage on a rate of 3.39% (a BIG difference). Initial hardship is worth it if you can put up with it and ride it out.

Also, something everybody misses and doesn’t think about at the moment with ISA rates being so crap and low atm - put your mortgage savings into bonds - I would put money on anyone making more money from bonds than ISAs atm. You can access all the money in bonds just as quick as you can from an ISA!

Cheers.

[Squashed_Fly]

The gifted deposit works because you're buying the property for less than it's market value. If it's valued at £180k, and you get them to accept an offer of £170k, then it means the house is still worth 180, you just got a bargain. And the money you saved goes towards your deposit.

It might not be for everyone, but it's worth asking about if you're looking at the moment and can't afford a big deposit. The trouble is, with pets, the need of a spare room as a home office, and the plan for kids in the near(ish) future, then we need a 3 bed house and so we would be looking at around £170-£180k where we want to live.

Interestingly, I moved here from Cheltenham, where the same property would cost you £300k+!!!! Wiltshire is VERY cheap to live in!

[Gerry]

Sounds very interesting!

I'm a bit of a stickler for tradition unfortunately - I managed to save £25k on my own for a deposit, and have paid off a further £10k since moving in 2.5yrs ago through VERY hard saving. Started saving for a house when I was very early 20s and stuck to being strict and careful with money for about 6 years.

Did effectively cause the breakup of a 5yr relationship mind you! She hated me saying "I haven't got any money left this month" when in actual fact I meant "..after having put my usual amount in my house fund"

What a result Dabz - this ought to be a lesson for all young men.
You finished up with a House and a Hazel

G

[Nico_babe]

I reckon you came out tops with such a lovely HAZEL
XXXX

[Crosbie]

The gifted deposit works because you're buying the property for less than it's market value. If it's valued at £180k, and you get them to accept an offer of £170k, then it means the house is still worth 180, you just got a bargain. And the money you saved goes towards your deposit.

It might not be for everyone, but it's worth asking about if you're looking at the moment and can't afford a big deposit. The trouble is, with pets, the need of a spare room as a home office, and the plan for kids in the near(ish) future, then we need a 3 bed house and so we would be looking at around £170-£180k where we want to live.

I understand how it works but do not know how lenders look on it and have not heard of any friends using this method. As you say its definatly workth asking.

Just bear in mind that because its on for £180 doesnt mean it is actually worth that. Example being the estate agents valued mine at £130 but the lenders valued it at £120 so if i was looking to buy it from someone else selling it at £130 i would have to offer £120 or below for the lender to agree to the purchase/mortgage and lower still to benefit from the gifted deposit.

Wiltshire is most definatly a cheap area to move compared to others

[Honda_Star]

mm - as a conveyancing solicitor, I know that the lender's are not happy with these arrangements unless fully disclosed to them. Under the CML rules (Council of Mortgage Lenders ) rules, the price on the contract must be the price you pay and any incentives should be reported. Sure there are might be unscrupulous solicitors who might take your money and not report the fact to the lender but I certainly wouldn't risk my practising certificate on it. No chance. The lenders will lend against what you are paying not against market value. The value is almost insignificant. The paperwork must reflect the true price (eg if you are paying £170k the contract MUST state £170k and any 'gifted deposits' must be reported to the lender (if the solicitor is worth their salt) Not sure this would work to be honest froma legal perspective but I'm willing to have a debate about it.

[Ducatista]

If it's valued at £180k, and you get them to accept an offer of £170k, then it means the house is still worth 180, you just got a bargain.

Err no, complete fallcy.
If the best price it fetched on the open market was £170K then that's what it's worth.
It's not worth £180K just because someone says it is.

I am with Star on this.
The lender wants to have the correct LTV (loan to value). The reason why they say 90% max is because that protects the security for their loan and reduces their risk if there are house price falls.
The price must be reported corrected.

If it's all above board then fair play, but if something is being reported incorrectly to the lender then it's fraud.
If the wrong price is reported to the land registry for stamp duty purposes then that may be an issue too.

I am not sure if this is legit, but I certainly don't think you can buy a house for £170K when it's worth £180K unless the seller is in distressed circumstances.
The only time people sell their stuff for less than it's worth is if they have an issue.
Paying less than asking price is normal, but the house is still only worth what you paid, not what someone claimed they coudl get for it, but didn't. If they truly believed it was worth £180K why would they sell it to you for £170K???