House deposits?

[Ducatista]

I wish you all the best with your hopes and your housebuying but I'm afraid I think it's all a big con (possibly quite a legal one).

If properties are genuinely available below market value, they tend to go to auction where they get picked up by genuine professional investors/landlords.
Any that don't go to auction will be picked up by the estate agents or the professional investors who will pay the estate agents a backhander I'm sure.

I'm sorry if this sounds harsh but I think it's naive to think you can easily just pick up a property below market value when there are people on the inside who will reserve the bargains for themselves and their mates.
If it was eay to just "flip" a house for £10K and it was genuinely worth £10K more then there are plenty of investors with a lot more cash than you have and with relationships with the agents.

Sorry I think it's a con (or legal loophole) and I don't think you are getting the genuine bargain you think you are.

But I wish you all the best with it.

[Snowy]

As its been 20 years since I last bought a house I don't understand this gifted deposit thing. Back in the olden days you agreed the deposit to be paid with the vendor - it was something you mutually agreed and had nothing to do with the mortgage or house value whatsoever. In my case I agreed with the vendor to pay a 5% deposit which was based on the agreed sale price (not the advertised price or valuation). I then took out a mortgage to cover the balance once I had put my savings into it. The mortgage lender then valued the property to make sure their asset was a worthwhile thing to invest in etc etc. should I default on the mortgage. This risk on their part obviously varies according to the size of the mortgage but they based it purely on their valuation of the property minus their mortgage amount. They never told you their valuation on the property just that they considered the mortgage to be less than it's value and since they are the prime charge on the property i.e before you, thats all they cared about.

[Dabz]

Don't get me wrong SF - I didn't "just go to my bank and ask for a mortgage", both times (mortgage and remortgage) I used an IFA who is bloody brilliant, and I shopped around and did my own research. My mortgage costs me £290 a month which didn't happen by accident

So, having done it twice, and having ended up in my late 20s with 30% equity in my house, I stand by my opinion that the only easy, safe, reliable and relatively risk-adverse way of getting a mortgage that you can afford month on month is by saving, and saving a lot

[Ducatista]

Dabz is right.

There is another problem with this scheme. The purpose of the deposit is to make you save.
Savings makes a massive difference to your wealth.
After 20 years or so you can own a house, but it doesn't happen by accident or through fancy schemes.
I'm sure there are people at WB who have a lot of equity in their home and have a decent pension fund and have six figures in assets. You won't be able to spot them though because they probably aren't the ones flashing the cash.
Did the "haves" get on some clever scheme? no they just saved and over a period of time it makes a massive difference.

The problem with your scheme is that whilst short term it might get you on the ladder quicker which might be attractive, it doesn't change the fundamental fact that if you want to be wealthy long term you need to save and whilst you might be putting that off until you've got the house, believe me it only gets harder once you've got a house and then kids.

I recommend reading this wll known book

http://www.amazon.co.uk/Millionaire-...=1H57N0SMVKJWE

Do some more research before you make a decision that could affect you for a long time.

Hope it all goes well.

[Squashed_Fly]

Saving is great, if you can afford to do it and have enough disposable cash to save £18,000 in the the time needed to do it before we don't have enough working years left to pay the mortgage at an affordable rate.

I get you might have your thoughts about the schemes available, but with the greatest respect, unless you have the amount of years experience in the industry that our IFA has, I will probably listen to his advice about what is the best option for us at this point in time....

[Dabz]

if you don't have the disposable income to save, how will you cope when interest rates rise, along with council tax, utility bills etc, and when you have to save ready for remortgaging at the end of your initial fixed term?

[Snowy]

I have been struggling with this term "Gifted Deposit" but having reread the posts I am wondering if thats just sales patter for a mutually agreed reduction in the deposit amount between buyer and vendor?

So, if the asking price is £180K but the agreed contractual price is £170K, if the deposit was 10% the required deposit goes from £18K down to just £17K to find. However, unless things have changed, there's no hard and fast rule over the deposit amount - its negotiable. So, what I think your IFA is suggesting, as part of the sale negotiations, is getting the vendor to agree both to a reduced price from the asking price plus a reduction in the deposit percentage to 5%. That would give you a deposit to find of £8.5K instead of the £17K, saving you £8.5K to find at exchange of contracts. The balance of the purchase price would then be £161.5K which is paid on completion made up of the balance of your savings and mortgage.

SF - is that what your IFA is proposing?

[Ducatista]

Saving is great, if you can afford to do it

If you don't have any spare income, then how will you afford the extra costs of ownership?

The basic point is that if you can't save for a deposit then can you afford the house?

Have you sat down and worked out both how you are going to afford the inital costs (stamp duty, removals, legal fees, curtains etc.) and the ongoing costs of ownership (insurance, repairs, maintenance).

If you have then great.

[Ducatista]

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.

[wiggy]

Hope it goes well for you when you do save enough , i dont earn enough to buy , and if i did dont think id put a morgage around my neck,work front is far far to unsatble to have a 25 year debt .Just the way i see it ,and i like my flat lol .