View Full Version : House deposits?
Squashed_Fly
15-08-11, 10:37 AM
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 :)
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
15-08-11, 11:06 AM
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
15-08-11, 11:14 AM
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
15-08-11, 11:28 AM
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!
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
15-08-11, 11:40 AM
I reckon you came out tops with such a lovely HAZEL
XXXX
Crosbie
15-08-11, 11:59 AM
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
15-08-11, 12:34 PM
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
15-08-11, 12:43 PM
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???
Honda_Star
15-08-11, 12:47 PM
Also - even if you had a vendor who was willing to agree to put £180k on the paperwork and 'gift' you a deposit of £10k (I can't ever imagine any of my clients agreeing to do something like this), but for argument's sake...lets say you know the vendor and as a favour they agree to a contractual price of £180k but will gift you a deposit of 10k....this MUST be reported to the lender. The lender will then know you are not paying £180, but 170 and I am pretty sure they will lend against that and will be probably be questioning why the vendor is gifting that amount to you!! If its not reported then = mortgage fraud. Which ever way you look at it, I don't think it would work from a legal perspective.
Squashed_Fly
15-08-11, 01:07 PM
I'm the first to admit, having never bought a house, that I know very little so a debate is pointless.
But it it works, it's legal, and it gets us on that 1st rung of the ladder, then I'm game :)
Honda_Star
15-08-11, 01:18 PM
I'm the first to admit, having never bought a house, that I know very little so a debate is pointless.
But it it works, it's legal, and it gets us on that 1st rung of the ladder, then I'm game :)
The only point I want to make is that I dont think it does work..withouth speaking to your IFA friend I am limited in what advice I can give but it verges on the edge of mortgage fraud from what you have said and I would avoid it at all costs.
Ducatista
15-08-11, 01:36 PM
Gifted deposits are not fraudulent when disclosed and the real purchase price used. However, increasing the value of the property to hide the gift and recording that as the purchase price is fraudulent.
If it's not legal then it won't get past solicitors unless they are in on it as well.
sounds to me there's no easy way of purchasing a property other than saving hard for a decent sized deposit
sounds to me there's no easy way of purchasing a property other than saving hard for a decent sized deposit
+1
Ducatista
15-08-11, 02:20 PM
sounds to me there's no easy way of purchasing a property other than saving hard for a decent sized deposit
Back in 1991 we bought a house with no deposit (I was just out of uni so had little in savings), with an "equity share scheme" from the builder.
We bought 80% of the property with a mortgage.
The builders owned the other 20% and we would have to buy that off them within 5 years for 20% of the value (min was the purchase price).
Unfortunately house prices went down.
We were both working so we saved up and paid off the charge (in fact we negotiated a 9% discount for paying early) but we would not have been able to put it on the mortgage as the house price had fallen by over 1/3rd (from £70K in 1991 to £45K in 1996).
We could have been in a much worse position and some people were. Some people needed to relocate for work but couldn't take on the money they owed.
When I see all these schemes coming out I do wonder whether we are in for a correction in property prices when the public sector cuts kick in.
I think this is a sign that builders/bank are trying to keep the market going when ultimately continually rising house prices is unsustainable.
Squashed_Fly
15-08-11, 02:26 PM
Disagree Dabz - there's no 'easy' way so to speak, but there are different routes than just going to your bank and asking for a mortgage.
With Jen being a teacher,we have acess to a whole range of mortgage products and low rate mortgages through keyworker schemes, plus there is the Teachers Building Society who will still do 0% deposit mortgages for teachers. There are also part buy-part rent, shared ownership etc.
Lots of ways to make it easier to take that first step :)
Star is right in that if you do anything illegal, then it's a criminal act. But GDs aren't illegal. They're just one of lot's of ways round that first hurdle if the circumstances are right. If you imagine the scnario where you know your house has a market of value of X, but you want it shifted fast (perhaps you need the money, can't keep up the payments, moving abroad etc), then you would accept Y for it for a quick sale. We have no chain so we would be ideal candidates to look for that kind of deal.
Banks happy that the house is worth more so LTV is still fine. Buyer, seller, solicitors & surveyors are all in on the transaction so all good.
It's not right for everyone, but personally, I would rather save the £10k (or whatever it is) and use that towards our childrens futures etc so it's worth seeking out those properties.
If you've gone the traditional route, then I guess it's a bit frustrating to see people benefitting from loopholes in the system, but that doesn't mean it's wrong. So long as you're happy with your house, and the deal you got, that's all that's important. I just thought I'd share it as others may benefit from knowing about a possible option. If it's not for you, then you need not worry! 8-)
I'm no expert so won't hand out advice, but from personal experience I have been left with the conclusion that simple is best. On two occasions I have taken out mortgages which seemed fine at the time and a really cracking deal only to find that when personal circumstances change they suddenly are not so good anymore. In one case I was hit with interest rates going up to 15% (thanks Maggie) and with the other I was mis-sold a mortgage capital payment plan by a large and very well known financial institution.
With the high interest rates I had to just take that on the chin but it took 7 years to recover financially. The mis-selling saga ended up as a civil action that I won and at least got financial recompense for.
The length of time you will have a mortgage for almost certainly will include some form of major change to your personal circumstances such as divorce, redundancy, children, illness etc as well as the economic and financial condition of the country we live in. You never think it will happen to you...until it does. Luckily I'm out of all that now...wish I had had the benefit of hindsight at the time of making the biggest single financial decision of my life.
I started saving for my house when i was 20, just after i bought my ninja so my savings at the time were zero lol. I did all the over time i could, didn't go out every weekend after football like i had been. after 2 years i had managed to save 14k and 2 years ago yesterday i moved into my house, but as i wanted a largeish back garden and a garage i had to compromise and ended up moving further away then i wanted to, but as i wanted to buy a house and get on that first step of the property ladder so badly it had to be done. If you really want to buy your own place, no matter how hard it is, or how long it takes to save up then you have to do it, no if's or but's cus you will never get there. I'm 24 now and some of my mates havn't got any motivation to move out of there parents yet cus it's to hard to save according to them, but as people on here have proved it's not something new. :)
Ducatista
15-08-11, 04:27 PM
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.
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.
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
17-08-11, 08:06 AM
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-Next-Door-Thomas-Stanley/dp/0671015206/ref=wl_it_dp_o?ie=UTF8&coliid=I3MG63M63UHBY7&colid =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
17-08-11, 01:02 PM
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....
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?
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
17-08-11, 01:53 PM
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
17-08-11, 02:10 PM
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.
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 . :)
Ducatista
17-08-11, 03:45 PM
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.
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.
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
17-08-11, 06:05 PM
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.
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
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 :)
"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
17-08-11, 07:30 PM
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.
Yes Don-in effect the vendor has lost £10k :o 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 ;)
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.
No Don that is absolutely NOT legal in anyway as Star would confirm as that is mortgage fraud
Sale price £180k
Deposit needed £18k
Mortgage needed £162k
Sollys/buyers negotiated price £170k with a 'gifted deposit' of £10k from vendor.
Seller accepts arrangement as do their sollys.
RICS confirms value at £180k
Buyer deposits £8k
Mortgage lender £162k agrees valuation and is aware of the 'gifted deposit' deal/arrangement.
Seller loses £10k and receives no more than the £170k less fees
The Land Registry will list the value at £180k
So do you see how it is possible to put down a smaller deposit legally on a higher value property rather than just negotiating a straight forward £10k reduction on the price and then subsequently having to still find a deposit of £17k.
Hope that helps :)
"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.
If thats the case then things really have changed since I last did this ;D. In my day, the deal was done between the vendor and buyer, the deposit was paid by the buyer to the vendor and the lender paid the mortgage to the vendor to cover the balance.
Why would a deposit be payable to the lender?
The lender takes the deposit incase you cant keep up the re payments. Then that will cover the cost if the house needs to be reposessed and sold on cheap.
Both times I've done it I've paid the deposit to the solicitors
No Don that is absolutely NOT legal in anyway as Star would confirm as that is mortgage fraud
This is why im not a mortgage advisor ;D
Honda_Star
17-08-11, 08:04 PM
No Don that is absolutely NOT legal in anyway as Star would confirm as that is mortgage fraud
That's right col - 11 years as a solicitor so maybe my advice should be followed ? ;)
The lender takes the deposit incase you cant keep up the re payments. Then that will cover the cost if the house needs to be reposessed and sold on cheap.
Again, so much change in 20 years. It used to be the case that if you didn't keep up the repayments on the mortgage the lender would reposses your house and sell it to recover the debt. Bizarre ;D
Both times I've done it I've paid the deposit to the solicitors
Yes mate who then passes it on, after taking a few weeks of free interest payments, to the vendor along with the rest of your hard earned ;D
I do know what your going through though SF, i am the worst person ever for saving as i always want a new toy for the garage :)
You could always ask the parents or In laws :-/
Thats what i had to do to secure my second mortgage. The bank wanted £38k deposit and I had nothing saved :o
So i asked the in laws if they would release some equity from there property as they where mortgage free. They did exactly that for the sum of £38k. It just means that now i have to pay my own mortgage plus the monthly repayment on there mortgage. I also pay an extra £300 a month off the inlaws to get the £38k paid off quicker ;)
Not the best way to do things but if you find it hard to save then its a possibility.
Last Train
17-08-11, 08:13 PM
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
http://www.smileyvault.com/albums/signs/smiley-vault-signs-016.gif (http://www.smileyvault.com/)
Don I added to that post to kinda clarify the idea :)
No Don that is absolutely NOT legal in anyway as Star would confirm as that is mortgage fraud
That's right col - 11 years as a solicitor so maybe my advice should be followed ? ;)
Star....at last. Some sense coming lads. ;D ;D
Ducatista
17-08-11, 08:20 PM
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.
The surveyor cannot inflate the price above market value. If they do it's mortgage fraud.
It can however be sold at less than market value.
Provided you are not evading tax or deliberately depriving yourself of assets to get state benefits, then you can sell your house for as low a price as you like.
Normally genuine opportunities do not come to ordinary people because anyone in the business will cash in on a desperate seller before it gets to the general public and therefore I am skeptical.
Cheers Col
Thats what i was trying to say but could not find the right way to explain it ::). Still not legal then?
Cheers Col
Thats what i was trying to say but could not find the right way to explain it ::). Still not legal then?
Not legal the way you put it but it is the way I put it. It used to be very popular method used by large builders/developers to sell their multitude of houses and provide continued business by way of achieving high turnover which amounts to £millions.
It is extremely unusual in a single private sale as Ducatista has pointed out a genuine opportunity seldom presents itself. Mortgage lending has been severely tightened up and some would refuse to lend with this 'deal' in place but others might.
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.
The surveyor cannot inflate the price above market value. If they do it's mortgage fraud.
I thought that was what I was saying Lisa ;) The market value is inflated above sale price :)
Ducatista
17-08-11, 08:40 PM
The market value is inflated above sale price
We don't know whether the valuer has deliberately inflated the value to seal the deal (illegal) or whether it's a genuine discount from market value by a desperate seller (legal).
Like you I'm skeptical, but we are not in a position to judge any individual case.
The market value is inflated above sale price
We don't know whether the valuer has deliberately inflated the value to seal the deal (illegal) or whether it's a genuine discount from market value by a desperate seller (legal).
Like you I'm skeptical, but we are not in a position to judge any individual case.
Completely agree - I'm being old fashioned again ;D ;D I was taking an interest in this thread because I shall be moving next year and thought I might be picking up a tip I wasn't aware of. Don't think I have though ;)
Ducatista
18-08-11, 12:53 PM
You won't get any arguments from me about being old-fashioned. Your summary that there aren't any clever shortcuts fits in with my thinking.
As I said we did a shared equity scheme in 1991 to avoid saving a deposit.
As prices were in decline we would probably have been better off waiting and whilst we accept full resposnsibility for our decision, I do wonder whether these schemes to "help" people onto the "ladder" when they can't otherwise afford to are actually schemes for the IFAs/solicitors/lenders/builders to support high house prices that would not otherwise be supported.
The problem is that someone wanting to buy doesn't want to hear they can't afford it and anyone selling them a service doesn't want to tell them that either.
You won't get any arguments from me about being old-fashioned. Your summary that there aren't any clever shortcuts fits in with my thinking.
As I said we did a shared equity scheme in 1991 to avoid saving a deposit.
As prices were in decline we would probably have been better off waiting and whilst we accept full resposnsibility for our decision, I do wonder whether these schemes to "help" people onto the "ladder" when they can't otherwise afford to are actually schemes for the IFAs/solicitors/lenders/builders to support high house prices that would not otherwise be supported.
The problem is that someone wanting to buy doesn't want to hear they can't afford it and anyone selling them a service doesn't want to tell them that either.
The mistake I made listening to an IFA was to take out an interest only mortgage. The plan was that I could pay off the capital element of the mortgage after 25 years by utilising the cash amount I could take from my company pension which by that time would be available to use. The balance of the lost pension amount would then be redressed by a seperate AVC pension which I took out at the same time as buying the house. It seemed a good deal - it was the cheapest option, I gained tax relief on the AVC making that a good back up pension and the IFA made the commision on the AVC policy sale.
The problem was that there were too many parts to the equation that could (and did) go wrong, not least the pension values (based on investments) and changes in my personal circumstances that could not have been forecasted. In the end there was a "class action" suit based on mis-selling of the AVC's against their intended purpose of which I was part and gained compensation for. I then went back to basics and changed it to a normal capital repayment mortgage.
It does go to show that no matter how good you think or are being told a product is, these can just be too complicated and rely too heavily on external factors you have no control over. You have to also remember it's your money and life's future that's being dealt with, not that of the "experts" who are involved in selling or profiting on your business.
Ducatista
18-08-11, 02:04 PM
We also took an endowment mortgage in 1991 and were told it was the best thing since sliced bread and that whilst they were under an legal obligation to show us 6%, 9% and 12% returns, that in reality we could expect much higher.
The advisor was wrong.
Luckily we were compensated and were in the same posistion as if we hadn't take it out.
But hey don't listen to us. The guy with the vested interest knows best ;)
It may be different now, but I wonder what you have to do to call yourself an IFA ?
A few of years ago I had a young customer who had a small cleaning company, a very smart young man who was very good at presentation. He was forever getting into financial trouble, thinking of great ways of getting out of trouble only to dig himself more into a hole.
Eventually his business went bust owing quite a lot of money.
I bumped into him a couple of months ago and asked how he was doing to be told that he was doing really well as an IFA :-/
God help his customers !!!
Saying that, as Bank Managers nowadays just want to flog you stuff I'm not sure who is really "independent" !
G
Squashed_Fly
18-08-11, 08:45 PM
I guess the onus is on you to check how good your IFA is before using them. Bankers, IFAs, Solicitors, Teachers, Doctors - they're just titles awarded to people who have gained a qualification. Like drivers - just because you passed your test doesn't make you a good driver.
Do your research and don't get stung. If it seems too good to be true, it probably is. This isn't a 'too good to be true' deal, it's something lots of people do every day to get on the housing ladder. If you don't understand how it works, or think it's a con, that's fine. But unless you have been & spoken to a mortgage broker or good IFA, you probably haven't researched it thoroughly enough to make a judgement either way before writing it off as a bad idea.
I think buying your own home is a personal choice and if you want it bad enough you will find away.
There are millons of home owners out there so it is not unrelistic to join them, it is possible for anyone.
I worked damm hard and made it happen, when my friends were going to the coast or a having BBQ, i was working.
Now my mortage is managble and I am nearing the end, I am enjoying the fruits of my labour and very proud of what I have acheived.
Hard work, overtime, saving and dedication will see you to your goal.
Honda_Star
19-08-11, 12:12 AM
Bankers, IFAs, Solicitors, Teachers, Doctors - they're just titles awarded to people who have gained a qualification.
'just' titles?????? >:(...not that we have to study for years and years and years to gain the 'title'?
Well, I tried to help, but I guess my 'title' doesn't count for much......
I've just sat for the past half hour reading through all this, makes very interesting reading, as I will be looking at buying a house in the new year.
It really is bloody complicated, I will go see an advisor to get it all explained to me and see what's what.
This whole year I have written off financially I have cut back LOTS instead of spending 200+ every weekend in town I rarely go out on weekends now and am saving lots, also started a new job beginning of this year training and next year my wages will be pretty good when I've done my NVQ's
As far as saving goes I've saved a fair chunk already along with other money I already had, hopefully should be in the position to have about £30k for a deposit, just out of interest can anyone advise if this will help me and make it a little easier to get a mortgage, obviously depends on earnings etc but with a good deposit it must be a little easier?
Squashed_Fly
19-08-11, 07:16 AM
Bankers, IFAs, Solicitors, Teachers, Doctors - they're just titles awarded to people who have gained a qualification.
'just' titles?????? >:(...not that we have to study for years and years and years to gain the 'title'?
Well, I tried to help, but I guess my 'title' doesn't count for much......
Don't take it personally! You've taken that out of context and I noticed you didn't quote the rest of that post where I explained it... ::)
What I said is just because you've studied for a qualification, doesn't automatically make you good at your job. I know good doctors and bad ones, good teachers and bad ones. They all did the same degrees, and worked just as hard to get them.
Surely as a solicitor, you can appreciate that? Unless your telling me that you've never met a 'professional person' who you wonderd how they ever got qualified?
As per usual, this thread is steering a long way from the initial post where I was actually trying to share something I'd learn that may, or mat not, be of use to someone else in the same situation. Of which there are millions of young people. It's on the news every day!
It has...but then you mentioned a new scheme and got 5 pages of people with real life experience...some who work in the industry too..saying avoid it. Surely that's worth it's weight in gold?
Honda_Star
19-08-11, 07:37 AM
SF - maybe I didn't elaborate enough on my earlier posts....believe it or not, I am trying to help you (and others reading this thread) with the knowledge and experience I have gained directly related to the topic you have posted about.
When you purchase a house you not only need advice from an IFA but also a lawyer. The laws & regulations that we have to abide by change regularly. I deal with IFA's all over the country of varying abilities, many based in the City who are very experienced. I am often approached by them, estate agents and clients about various 'schemes'. The scheme (if it is as the way you have described it) is one I have been asked to give my legal opinion on before. Quite often I advise the people that seek my advice that the scheme will not work and I explain in detail why from a legal perspective, and that is what I am qualified to do.
All I can go on is the information you have posted on your thread, however I could not read the thread without posting my comments as I think they are pretty valid and maybe a small amount of notice might be taken of them - but they have not even been acknowledged!!
Yes, financial advice is important when purchasing a house....but so is legal advice. Yes, your IFA might know solicitors who have no problems working with the scheme he is suggesting...however from experience I do not think it would work . That is my advice...you can listen and if you would like me to explain it further I would not mind at all, as I do want to help people on here. Not many people get my time and advice for free ;)....
I've just sat for the past half hour reading through all this, makes very interesting reading, as I will be looking at buying a house in the new year.
It really is bloody complicated, I will go see an advisor to get it all explained to me and see what's what.
This whole year I have written off financially I have cut back LOTS instead of spending 200+ every weekend in town I rarely go out on weekends now and am saving lots, also started a new job beginning of this year training and next year my wages will be pretty good when I've done my NVQ's
As far as saving goes I've saved a fair chunk already along with other money I already had, hopefully should be in the position to have about £30k for a deposit, just out of interest can anyone advise if this will help me and make it a little easier to get a mortgage, obviously depends on earnings etc but with a good deposit it must be a little easier?
Ryan, in my experience, this is the single most important and BEST thing you can do. The bigger your deposit, the less interest you will pay each month, and the quicker you will be able to pay it off and reap the benefits in the long term.
Edit: And yes, £30K will give you a great start on the housing ladder. Going without a few things now will make you one of the "have's" in years to come. :)
Star, you can lead a horse to water, but you can't force it to drink. I have your number for next year ;)
Ducatista
19-08-11, 08:50 AM
just out of interest can anyone advise if this will help me and make it a little easier to get a mortgage, obviously depends on earnings etc but with a good deposit it must be a little easier?
Hi Ryan - You are doing absolutely the right thing.
A cash deposit not only reduces the amount you have to pay back but gives you access to better deals.
Lenders have some criteria for lending.
One of them is LTV (loan to value). The don't like lending 100% generally as it's risky for them as house prices can go down as well as up. The bigger deposit you have, the lower the LTV, the less risky it is for the lender.
This increases your chances of acceptance, gives you accesss to more deals and lower rates/better terms as well.
Bear in mind you will have some upfront costs like mortgage fees, stamp duty, removals, curtains etc.
You should also carrry on paying any credit accounts you have on time (mobile phone contract, store cards or credit cards).
You payment information is recorded for many years and builds up a credit history on you.
You can check your credit history for £2.
There are 3 credit reference agencies - Experian, Equifax and Call credit.
If you pay your bills on time you will have built up a good history which increases your chances of getting a mortgage.
Ducatista
19-08-11, 08:59 AM
As per usual, this thread is steering a long way from the initial post
I don't think it has at all.
The comments have all been very relevant to the subject.
Do you mean it isn't what you wanted to hear?
Some people on here have done very well for themselves and whilst they don't have formal qulifications have decades of real life experience.
No-one on here has a vested interest or ulterior motive so you'd do well to listen to some of them.
Putting aside opinions on the scheme, I'd say it's unwise to rely on a single opinion for a vested interest in any important decision, so I would encourage you to at least get a second opinion.
Good luck with it.
P.S. Just because lot sof people do something doesn't mean it's a good idea. Milllions of endowments have shortfalls and they aren't sold anymore (that's not an exageration).
Squashed_Fly
19-08-11, 09:23 AM
I know - I spent a long time undoing the mess left behind from unscrupulous IFAs (and solicitors!) when I used to work for the C&G (Yes - I also have some experience in the mortgage industry - along with a mum who had her own mortgage brokerage for many years as I was growing up). I also advised on many a payout when we had to refund a LOT of money where endowments were mis-sold across the board.
I get the impressio people think I've heard something on the grapevine and am raving about how good an idea it is when it might in fact be illegal.
Star - I'm not (and never did) doubt your abilities, qualifications or anything else. And I'm always grateful for a second opinion. However, without you actually sitting down in the rom with our IFA & us together, it makes it difficult for you to understand our situation, and exactly what the potential mortgage deal is. If you're still offering your time for free, then perhaps when we meet with Mike after the wedding to discuss options, you could be there as an impartial person who may know more about what questions to ask to ascertain exactly what we are getting...
Put simply - my initial post was 'this is an option, speak to your IFA (or solicitor) about it if you think it might be of interest. Then lots of people have put in their 2 penniesworth without knowing fully about the deal, our personal situation, exactly what & how the GD scheme works, or all of the legal ramifications so how can they possibly have an opinion unless they know all of that? That's what I meant when I said it's steered off topic...
Here endeth my input into the thread!
[/quote]
As per usual, this thread is steering a long way from the initial post where I was actually trying to share something I'd learn that may, or mat not, be of use to someone else in the same situation. Of which there are millions of young people. It's on the news every day!
[/quote]
From what I have read, for private sales on which gifted deposits are allowed are now very few and far between. Just some "Googling" on the subject should set some warning bells off. Anyhow....
I think what gets some of us to engage in these threads is that we feel some could learn and listen to experienced advice from others who have, in their own lives, done that and bought the tee-shirt to prove it. If some choose to ignore it and do their own thing then thats fine and that is their choice. Carry on getting married, buying track bikes, spare wheels, tyres, track days etc. Just don't put up on here how you can't afford to pay a house deposit and how difficult it is to get on the housing ladder.
All I would hope to be able to do, by commenting on these types of threads, is put some doubt in the minds of others, such as Ryan, who have never done this before, that all may not be as rosy as it seems when they read of such schemes on the internet. They may be just fine... but they may not be.
One thing I learnt from my father 30 years ago now was to always take legal advice. He said that a £1,000 spent today will save you a £100,000 later. He was and is still right. I'm living proof of that.
SF, you do whatever you want to do. Ryan mate, well done for doing all the saving you have. My advice, is get legal advice - always. I know it seems expensive now, but in the overall scheme of things, for the single most important financial transaction you will ever make, it's as cheap as chips.
Ducatista
19-08-11, 09:57 AM
All I would hope to be able to do, by commenting on these types of threads, is put some doubt in the minds of others, such as Ryan
+1
The comments are not necessarily all for your personal situation SF, but for all the other lurkers.
These type of schemes have been used fraudulently in the past so it's as well that people are aware that it goes on in the industry.
Plus it's good to highlight to people that when these schemes have appeared in the past when houses were unaffrodable by normal means, it was to support unsustainably high house prices and it was followed by falls.
Warning: this is not a ladder.
Squashed_Fly
19-08-11, 10:22 AM
That's fine - but it does come across as extremely patronising, whether intentionally or not. And that's what gets my back up.
I work hard for my money, and I do save. And I do also like to have a life as well, which I am entitled to do!
If i want to save a bit less, and get some bike bits, I am allowed to do that! And if I want to look at alternative options to getting a mortgage without spending years saving and living with no 'extras' in life, I am allowed to do that. I don't go out drinking, I haven't had a holiday in 2 years and I am paying for a wedding so yeah, from time to time, I might have a track day, or treat myself to something. I don't think 2 free afternoons at castle combe is excessive!
Squashed_Fly
19-08-11, 10:27 AM
Sadly Ducatista, even in the recent recession, house prices didn't fall that dramatically! Certainly not like they did at the end of the 80s/early 90s when all the endowment issues came about...
Cost of living has spiralled out of line with increases in pepoles wages. people are having to buy more, with less, more now than ever before. Pensions we're being told won't pay out enough to live on, 1st time buyers everywhere are struggling as the prospect of saving for a deposit is unrealistic for most people who already have lives, pay rent & bills & have families etc. Saving is a great concept, rovided you can afford to do it, like everything else.
That's fine - but it does come across as extremely patronising, whether intentionally or not. And that's what gets my back up.
I work hard for my money, and I do save. And I do also like to have a life as well, which I am entitled to do!
If i want to save a bit less, and get some bike bits, I am allowed to do that! And if I want to look at alternative options to getting a mortgage without spending years saving and living with no 'extras' in life, I am allowed to do that. I don't go out drinking, I haven't had a holiday in 2 years and I am paying for a wedding so yeah, from time to time, I might have a track day, or treat myself to something. I don't think 2 free afternoons at castle combe is excessive!
Of course, as I have said a number of times, it's all your choice as to what you do and how you do it. We all live and are responsible for our own decisions in life.
My choice is to be in the "Save now, Buy later" culture and not the "Have now, Pay later" culture.
I also wish I had had the benefit of so much actual experience as you obviously have at such a young age. All the personal knowledge of bad Solicitors, bad IFA's, bad Teachers, bad Doctor's, bad Public Servants etc will, I'm sure, stand you in good stead for the rest of your life. Good luck to you - I wish you all the best in your future endevours.
Squashed_Fly
19-08-11, 10:54 AM
I also wish I had had the benefit of so much actual experience as you obviously have at such a young age. All the personal knowledge of bad Solicitors, bad IFA's, bad Teachers, bad Doctor's, bad Public Servants etc will, I'm sure, stand you in good stead for the rest of your life.
You really are an arrogant, patronising & condascending knob at times Graeme.
Ducatista
19-08-11, 11:05 AM
I'm sure no-one is intending to be patronising.
You are perfectly entitled to make the lifestyle choices you want.
The point has already been made that not all comments were aimed at your personally but to make sure lurkers get a balanced view.
Saving is a great concept, rovided you can afford to do it, like everything else.
At the risk of repeating myself :) the point of a deposit (as well as reduced LTV) is to prove you can afford home ownership.
There are costs with ownership that renters don't have. As an example buildings insurance is a mandatory contractual requirement of a mortgage (the lender does want their money if the house burns down).
If someone can't save from a position of renting then there is a question mark over the affordability of home ownership because where will you find the money for the extra costs you don't currently have?
For people living at home it's even worse than for renters.
I don't have any comment on your lifestyle, but if you can't afford everything you want then like the rest of us you either have to wait or you have to choose.
I personally put off a bike purchase last year, because I preferred to pay down my mortgage. I feel happier than way and when I was at risk of redundancy in May I was glad I had less debt. We all make those choices and it's a personal matter.
A fancy scheme will not ultimately magically make you be able to afford more. In fact accelerating buying things you can't afford through normal channels usually costs more long term and is occassionally disastrous.
1st time buyers everywhere are struggling
What do you think would happen if first time buyers didn't buy?
I think prices would come down.
However those in the buisiness don't want that, so they invent fancy schemes to keep it all going.
I have no idea if this scheme is right for your personal situation, but I would encourage you to get a second opinion and to work out your up-front costs and on-going costs related to home ownership.
I also wish I had had the benefit of so much actual experience as you obviously have at such a young age. All the personal knowledge of bad Solicitors, bad IFA's, bad Teachers, bad Doctor's, bad Public Servants etc will, I'm sure, stand you in good stead for the rest of your life.
You really are an arrogant, patronising & condascending knob at times Graeme.
Happy to accept that one SF - a calm and measured response. Also happy to accept that if I "bigged" myself up on this forum I would accept there may be some cynics out there ready to knock me down.
Squashed_Fly
19-08-11, 11:20 AM
That was a much better way of putting it Duc :)
It's not something we'll be rushing into, and Star has said she's happy for us to bounce any questions off her.
From some of the comments made by certain contibuters, you could be forgiven for thinking I was still an 18 year old child. And in some ways it's a compliment that Graeme thinks I am that, alas however, I am quite a bit older than that. I forget it sometimes, until those rare occasions when I do enjoy a drink and I suddenly remember this is why I gave up going out and getting drunk when I was in my early 20's! ;D
That was a much better way of putting it Duc :)
It's not something we'll be rushing into, and Star has said she's happy for us to bounce any questions off her.
From some of the comments made by certain contibuters, you could be forgiven for thinking I was still an 18 year old child. And in some ways it's a compliment that Graeme thinks I am that, alas however, I am quite a bit older than that. I forget it sometimes, until those rare occasions when I do enjoy a drink and I suddenly remember this is why I gave up going out and getting drunk when I was in my early 20's! ;D
At 18 you are a responsible adult, if only in the eye of the law.
The problem SF is that you have commented on this thread and many others on this forum from a position that you think is fact. When I read your statements on these threads I sometimes agree and disagree with them and on others where I have no knowledge on the subject, I do sometimes wonder where you get your facts from and how accurate they actually are. Sorry for being a cynic and that you feel I'm patronising, but I have owned 5 houses to date having bought the first 30 years ago, so feel reasonably confident in at least putting up an alternative point of view to balance yours.
You really are an arrogant, patronising & condascending knob at times Graeme.
And you, Aidan, come across as little more than an arrogant fool, the quintessential squid, a little knowledge on a subject from something you've heard or read somewhere and now you're the ****ing expert on it - not just this one, but damn near everything you post about, you ask a question and proceed to argue the toss with everyone who responds.
I've watched this thread with interest as you've managed to make yourself look more and more of a fool with every day, ignoring professional advice from people who do it for a living because it doesn't suit you, and throwing a casual insult at everyone who has gained a professional qualification through sheer hard work and effort - do you have a degree? Just a matter of passing a few exams according to you, so you surely must have one, or more?
You're the one who's forever bringing your personal finances onto the forum and believe me, we couldn't give a **** whether you were as rich as Beckham or as poor as a tramp, just don't keep bringing it up. Your final flourish is to progress from a generalised casual insult to a direct personal one aimed at someone who's spent days offering you the benefit of his experience, but because it wasn't aligned with your little scheme you had to resort to name-calling. If you were as clever as you believe, you'd at least spell condescending correctly, there is no "a" in it.
Do whatever you feel you have to in order to get aboard the property ladder. Have you any idea what someone's credit rating would be like following a conviction for mortgage fraud and a repossession? It could be you...
Announcing on a public forum that you're going to do something that is potentially illegal is smart, really smart. Good effort.
Thank you Graeme and Lisa for the words of advice :) i would note that as both of you have your own houses and many years of experience you should know what your talking about ;)
Unlike some of my friends i am very sensible when it comes to money, i wont have anything on finance if i cant afford it i wont buy it, been buying stuff on credit cards i have the money for then paying it off at the end of the month to build up my credit rating, also never faulted once on phone bills insurance etc, so i'm hoping i should be in with a good shot next year.
Lisa and Graeme... Thank you both once again :) :) :) :) :) :) :) :) :) :) :) :) :)
redken1
21-08-11, 02:41 AM
Scotty, did you mean to say "We" or was it a typing error like SF's spelling mistake?
Squashed_Fly
21-08-11, 08:54 AM
You really are an arrogant, patronising & condascending knob at times Graeme.
And you, Aidan, come across as little more than an arrogant fool, the quintessential squid, a little knowledge on a subject from something you've heard or read somewhere and now you're the ****ing expert on it - not just this one, but damn near everything you post about, you ask a question and proceed to argue the toss with everyone who responds.
I've watched this thread with interest as you've managed to make yourself look more and more of a fool with every day, ignoring professional advice from people who do it for a living because it doesn't suit you, and throwing a casual insult at everyone who has gained a professional qualification through sheer hard work and effort - do you have a degree? Just a matter of passing a few exams according to you, so you surely must have one, or more?
You're the one who's forever bringing your personal finances onto the forum and believe me, we couldn't give a **** whether you were as rich as Beckham or as poor as a tramp, just don't keep bringing it up. Your final flourish is to progress from a generalised casual insult to a direct personal one aimed at someone who's spent days offering you the benefit of his experience, but because it wasn't aligned with your little scheme you had to resort to name-calling. If you were as clever as you believe, you'd at least spell condescending correctly, there is no "a" in it.
Do whatever you feel you have to in order to get aboard the property ladder. Have you any idea what someone's credit rating would be like following a conviction for mortgage fraud and a repossession? It could be you...
Announcing on a public forum that you're going to do something that is potentially illegal is smart, really smart. Good effort.
Scotty, dear Scotty.
Go back to school, and write 100 times
"I must learn to read peoples posts properly, then do some research before I make stupid comments, then finally, before I get involved at the back end of a debate just to look the big man on the forum, I should probably find out all the facts first"
That will stop you joining 'Camp Graeme' in the red corner.
Oh, and just for the record, those pople that have had years of owning houses & having mortgages, probably don't understand, and can't relate the issues surrounding trying to save up £18,000+ in 5 years when they have bills, rent & families to think about, in a time when inflation & cost of living cmpared to salary, is at an all time high!
If you have been a saver, and always saved, and/or lived at home for years where you could afford to put enough aside, or bought your first house before the last 2 years (when banks were quite willing to lend 100% mortgages and 5x your salary), then just accept that, for the time being at least, things might be a bit different to when you got your first house.
Oh and Scotty - GDs are NOT mortgage fraud. Not if done properly anyway! That's a bit lke saying 'After my accident, when I needed new kit, this set of leathers I got a good deal on in George Whites, that would normally sell for £500, but I managed to squeeze them down to £300, I just commited Leather Fraud' on. Leather Fraud would be if bought the leathers at £500, but they wrote the value on the receipt as £700 just to get an £200 back from my insurance company. See the difference? Perhaps I could explain it one more time if you still don't understand the concept?
I wish I'd been brought up to make saving money a lifestyle choice (because that's what it is), but I wasn't, and it's not until now that I realise how important that is, to get started from a very young age.
[quote author=Squashed_Fly
Oh, and just for the record, those pople that have had years of owning houses & having mortgages, probably don't understand, and can't relate the issues surrounding trying to save up £18,000+ in 5 years when they have bills, rent & families to think about, in a time when inflation & cost of living cmpared to salary, is at an all time high!
[/quote]
Camp Graeme writes:
No one is saying it's easy as a first time buyer in the current climate, I have four kids finding that one out. But it can be quite easy to find statistics to back up personal opinions especially if only considering a narrow range of historical evidence. Those of us who have been through the house buying experience all have our own real life experiences to remind us how hard it was for us to. Take for example, when looking at your statistical evidence why not include interest rates into the equation? To give you somewhere to look at, try 1980 and 1990 - just take a look at the Bank of England base rates. Then maybe consider what it might have been like for first time buyers then. You need to put statistics into context to make a balanced comparison before you assume its harder now than it was back then.
Has there ever been a time when it's been cheaper to borrow money than it is now?
You may also wish to check out the inflation figures since 1980 as well, as an example in 1990 it was around 7%. What is it today?
Bikermouse
21-08-11, 03:40 PM
It's no wonder I can't be asked to contribute to this forum anymore. It's like being back at school again except some people simply don't learn.
Squashed_Fly
21-08-11, 04:58 PM
[quote author=Squashed_Fly
Oh, and just for the record, those pople that have had years of owning houses & having mortgages, probably don't understand, and can't relate the issues surrounding trying to save up £18,000+ in 5 years when they have bills, rent & families to think about, in a time when inflation & cost of living cmpared to salary, is at an all time high!
Camp Graeme writes:
No one is saying it's easy as a first time buyer in the current climate, I have four kids finding that one out. But it can be quite easy to find statistics to back up personal opinions especially if only considering a narrow range of historical evidence. Those of us who have been through the house buying experience all have our own real life experiences to remind us how hard it was for us to. Take for example, when looking at your statistical evidence why not include interest rates into the equation? To give you somewhere to look at, try 1980 and 1990 - just take a look at the Bank of England base rates. Then maybe consider what it might have been like for first time buyers then. You need to put statistics into context to make a balanced comparison before you assume its harder now than it was back then.
Has there ever been a time when it's been cheaper to borrow money than it is now?
You may also wish to check out the inflation figures since 1980 as well, as an example in 1990 it was around 7%. What is it today?
[/quote]
You make a good point there Graeme. Hopefully we can move this thread back to being one of good debate as (despite what may seem apparent), I am keen to hear from other peoples experiences.
You are right, in that once you actually get the money, it's much cheaper now to pay it back than it's ever been (or certainly for a long time!). And, in another year or 2's time, banks will likely go back to lending with lower (or possibly nil) deposits.
In terms of paying a mortgage, that's not a problem. We can afford the repayments, we pay rent already. The key part is that initial step to getting the funds. It's all well and good saying 'save save save', but if you are in situation (like millions) where you haven't, and now you want to start, the time it would take to save a 10% just makes it unrealistic. Plus once you have saved 10% of todays price, the house prices will have probably gone up by another 20-30k!
Who knows what the future will hold for lenders, borrowers and the economic climate? I'm guessing one way or another, it will have to be made easier, and more of these schemes will be available to help 1st time buyers, otherwise buying your first house will just be a pipe dream for the majority who haven't got that nest egg behind them. unless of course we see a big drop in house prices, will then make saving the 10% much more realistic... Time will tell I guess...
In a great deal of Europe home owning isn't on the agenda, renting is the norm. It wouldn't hurt the uk to follow suit in my opinion
DaytonaDog
21-08-11, 08:31 PM
In a great deal of Europe home owning isn't on the agenda, renting is the norm. It wouldn't hurt the uk to follow suit in my opinion
I believe in France you can have 99 year mortgages which can be passed down through the family. Don't quote me on that though as I may have been misinformed.
well that would beat this country hands down....older people are now expected to sell their homes to pay for their care when going into care homes !!!
In a great deal of Europe home owning isn't on the agenda, renting is the norm. It wouldn't hurt the uk to follow suit in my opinion
See renting baffles me totally. OK there are all sorts of arrangements and situations but when you see rents £800 / month or more then in comparison mortgage payments are not much different.
A 25 yr £165k loan @5% = £965/month
Snowy wrote 'Has there ever been a time when it's been cheaper to borrow money than it is now?'-- well I think it has been ,especially the years before these bank collapses--I don't think the 'tracker mortgages' are as good as they used to be and with Base Rate 0.5% there are fewer products about because of this low base rate offering a great deal better than SVRs. The SVR of all? lenders has increased in the last 5 years. Plus interest rates applied to lending are not in line with this low base rate....lenders have not passed this on to their products/customers.
I made an interesting discovery not too long ago in that lenders are raising their SVRs even higher to around 4/4.5 % :(
With the current finance instability it is unlikely to get better :(
Ducatista
22-08-11, 08:12 AM
SF - have you started a pension yet?
I realise it's a little off topic, but it's really something you should look at whilst planning your finances especially if you haven't started and have lost 10 years.
jonnydangerous
22-08-11, 08:16 AM
whats a mortgage????......... ;-) is that one of those things that other people have... :-)
Ducatista
22-08-11, 08:17 AM
See renting baffles me totally
There are some pros to renting
1) If you move around a lot you save on the transactions costs (stamp duty, estate agents, legal fees etc.)
2) You don't have your capital tied up or at risk.
3) You don't have to pay for repairs, maintenance, decorating, building ins or perhaps even furniture.
The downside is that you don't get any benefit from geared gains on property.
What I mean by "geared" is that if you put £10K down on a £100K property then you get the gains on the whole £100K. That works both ways of course - down as well as up, but long term it's generally up.
One of the effective things about a repayment mortgage is that it's effectively enforced savings.
So after 25 years you have a house.
Potentially renters could save the money they would have otherwise spent on furniture, the garden etc. but people tend not to.
Pensions and repayment mortgage work really well for most people because they make you save which over the long term has a really big effect.
Squashed_Fly
22-08-11, 02:03 PM
In short, I haven't started a pension. When we met with Mike, he said you'd be better off just getting your mortgage underway and paying it off asap. By paying off extra chunks wherever possible, then saving for the remaining years, the money you put aside in those years, combined with what you can then unlock in your property, together with Jens teachers pension, would more than likely be worth more than any pension you started now (or once you have finished saving for your house deposit!).
Property will never go down in value in the long term, so your house will be worth more than what you paid, plus the odds are you won't want/need a house big enough for the home office and kids bedrooms thus downsizing will unlock lots of capital. Added to that, there is a lot of inheritence tied up with parents who are still quite young so when that time comes, that is aditional towards our own pension (not that I really want to think about that too much, but you have to be realistic)...
If i was you SF (thank god i'm not :D) I would put all my efforts and opinions into saving up money for a deposit, rather then to justify some thing that is a bit of a con and insulting people that are giving you good and honest advice!!!
redken1
22-08-11, 07:12 PM
I agree with a lot that has been said with regard to renting. I still blame Thatcher for stopping the building of council houses – no surprise there then. In the long-term LA’s always recoup the initial outlay. I was talking to a German chap some time ago and he was comparing the UK’s house purchasing habits to that of his motherland. In the UK many of us tend to buy a house/flat foremost as an investment. In contrast, according to this chap, Germans tend to buy a home and stay there for most of their lives. Perhaps Lisa can confirm as to whether or not this is indeed the case.
whats a mortgage????......... ;-) is that one of those things that other people have... :-)
Jaydee, a mortgage is something that I will have paid off in 15 months time!! :) :)
Ducatista
23-08-11, 11:30 AM
Buying a house is a good idea long term.
Currently all indicators are downwards for prices, so you need to consider your timing. Public sector job losses have yet to kick in fully.
Overpayment is a great idea. The nitty gritty of doing it monthly is a different matter.
If you ever pay higher rate tax or your employer offers to match your contributions to a pension then not paying into a pension would be a bad thing to do, but I realise that might not be your circumstances.
I don't personally think you would unlock "lots" of capital if you are going from a 3 bed semi.
My in-laws downsized 8 years ago, they sold their 3 bed semi for £135K and bought a flat for £100K.
I know prices have gone up in the last 8 years, but the point is that the capital released is the wrong ball park to significantly supplement a pension and flats are not a great deal cheaper than your average family home.
I don't think you should count on an inheritance in your financial planning.
Apart from the fact that it could go to the toy boy/cats home, more realistically it could be spent on long term care or you could find you are retired well before you get it with people living longer.
redken1
23-08-11, 07:28 PM
SF, Pensions? I wouldn't trust the City gamblers with my hard earned.
Downloaded the following. Safer sticking it under the bed.
Economic uncertainty around the globe, prompted by a number of key factors emanating from the US, the Euro zone and the Middle East, has panicked investors somewhat, causing them to ditch shares in riskier asset classes in favour of what are historically viewed as safer investments, namely bonds, gilts, gold, commodities and property. This rush to sell has sent the price of shares into a tailspin, with all key global exchanges enduring something of a rollercoaster ride.
The impact of this turmoil has been bad for all but those that have the reassurance of guaranteed final salary pension schemes. In the last month alone, £120 billion was wiped off the value of UK pension savings and, according to research undertaken by the firm Towers Watson, the pensions deficit of firms listed on the FTSE 350 has widened by a daily average of £2 billion, increasing from £52 billion at the end of June to £73 billion as of the 10th August. Worse news for holders of pensions reliant on equity growth was the assertion made by Price Waterhouse Coopers that members of pension schemes would have been financially better off had they kept their money under a mattress rather than investing it!
Ducatista
24-08-11, 11:23 AM
I wouldn't trust the City gamblers with my hard earned.
You don't have to.
A pension is merely a wrapper (like a ISA).
What you invest in is up to you.
For example if you like property then you could invest in a property fund. You could also invest in bonds/gilts/cash.
A pension doesn't mean you just have to invest in stocks and shares it's just a wrapper that's all.
The underlying invstments (which can include cash) are up to you.
I get a 5% contribution from my employer plus 40% income tax relief which means I only have to put in 3% of my salary to get a 10% contribution (HMRC pays 2% in tax relief, employer pays 5%).
Frankly you'd be nuts to turn this kind of deal down especially if it's on some false assumption that pensions equals stocks and shares - that's simply false, you can pick whatever investments you want including cash.
Economic uncertainty around the globe
This is complete knee-jerk reaction stuff.
Stocks and shares are LONG term investments and can go up and down.
I'm not worried about what happened between June & August because I have 25 years til retirement.
If you are retiring soon then you should be moving your investments into safer types with less volatility.
To say you shouldn't invest in pensions because of short term volatility is rubbish.
Firstly you can invest in anything (cash, gilts, bonds, share, with profits etc.) and secondly equities are for the LONG term. If you invest in equities and don't undertstand they can do down as well as up then frankly you shouldnt' be investing in them, but you can still take advantage of the tax relief offered by pensions even if you want to leave it in cash.
Putting it under the mattress is risky because - there is guaranteed to be no return, no tax relief, it will go down in real terms and it could get stolen/soiled etc. (and yes I know you didn't mean it literally but the inflation and shortfall risks are still there).
Property or cash can be an alternative to more traditional investments but generally it's best not to have all your eggs in one basket and you need to consider the tax implications. The government offer tax incentives for pensions because they want to encourage people to save for their old age.
redken1
24-08-11, 08:42 PM
I am certainly no expert on pensions but, I remain sceptical. Back in the 80’s, I took out a 25 year endowment mortgage policy. Prior to signing the application forms, the advisor of a reputable financial institution advised me that in all probability, when the policy matured I could expect to receive a significant amount of cash after paying-off my mortgage. I lost £1000’s – where did all my money go?
Back to pensions, Royal Mail has a £10bn black hole in its retirement postbag – the biggest pension deficit in UK corporate history.
The size of the bill for payments to former mail staff will easily overtake the pension’s deficits hanging over other British companies, such as the £9bn revealed by telecoms group BT, or the near £3bn liability at airline BA.
The aforementioned are just a few of the high profile cases relating to the pension’s fiasco. There are hundreds of horror stories of pension scandals on the internet. I was reading one of many- a company went bust and the pension scheme was wound up leaving the contributors, the redundant workers with sweet FA. Nothing is certain and no one can predict what will happen when we reach retirement age. The government could be on to something – if they keep raising the retirement age there will be no need for a state pension.
>:(
Ducatista
25-08-11, 04:51 PM
when the policy matured I could expect to receive a significant amount of cash after paying-off my mortgage
We had a similar experience.
Did you make a mis-selling claim?
We did and got the £1500 back that we had lost.
I lost £1000’s – where did all my money go?
Bad investments. But that does not mean that you should never invest again.
An analogy is getting food poisioning and deciding never to eat again !!
I'm sure you would agree that would be a bad decision.
Nothing is certain and no one can predict what will happen when we reach retirement age.
True there are risks.
But you need to understand there are risks with doing nothing (having a very poor retirement) and risks with putting it under the mattress (not even keeping up with inflation).
The government could be on to something – if they keep raising the retirement age there will be no need for a state pension.
We are all living longer and therefore pensions are getting more expensive.
Yes, the government will have to default in some ways because it's a cast iron certainty that they cannot afford their liabilities.
I don't expect to get a state pension and I'm planning for it.
I would say two things.
Don't have knee-jerk reactions about things you read in ther paper, do some proper reasearch. A pension is merely a tax free wrapper that's all. It's the underlying investments that count and we all know that the meeja just want to sell papers etc. and are all morally corrupt anyway e.g. phone hacking scandal.
Secondly if you do decide you don't like pensions or investments then that doesn't mean it's ok to do NOTHING. That way you'll have a really miserable last few decades. Regardless of how you do it, you still need to plan your retirement, so it's not going to help just to throw the towel in.
redken1
25-08-11, 07:07 PM
Ducatista, thanks very much for your advice, I have taken on board what you have said. I like your analogy – a bout of food poisoning won’t stop you from ever eating again but, it certainly makes you more careful about what you consume in the future.
“Don't have knee-jerk reactions about things you read in the paper.”
I never do – I have been dealing with the media/press for over 25 years as a press officer and in a personal capacity.
Perhaps you could offer me some further advice on how you quote sections of a post and repost it, I keep making a hash of it. Thanks
:-[
When I took out my endowment mortgage policy in 1987, I was informed by the salesman(who worked for a market leading company) that when it matured it would pay the mortgage and the extra would buy me a holiday, or a new car, etc etc..
About 10 years ago , I received a letter informing me of a shortfall, a £12,000 shortfall, we made a mis-selling claim and their only offer was £3500, take it or leave it, leaving the final repayment £8,500 short.
I have since started an ISA that matures when the mortgage does, to cover the shortfall.
In my opinion, endowment policies were sold, as a product, for the intention of paying off a mortgage, the fact hat they do not
makes them not fit for purpose , the financial institutions should have been obliged to at least cover the mortgages of their customers, there's always plenty of money for their bloody bonuses. >:(
Squashed_Fly
26-08-11, 09:22 AM
This has turned out to be quite an interesting thread after all...
When I took out my endowment mortgage policy in 1987, I was informed by the salesman(who worked for a market leading company) that when it matured it would pay the mortgage and the extra would buy me a holiday, or a new car, etc etc..
About 10 years ago , I received a letter informing me of a shortfall, a £12,000 shortfall, we made a mis-selling claim and their only offer was £3500, take it or leave it, leaving the final repayment £8,500 short.
In my opinion, endowment policies were sold, as a product, for the intention of paying off a mortgage, the fact hat they do not
makes them not fit for purpose , the financial institutions should have been obliged to at least cover the mortgages of their customers...>:(
Toph absolutely nowt personal mate but just my opine regarding endowments ;)
Never understood the liability by providers for these endowments not maturing at the level expected.
I had one and was told that it'd probably pay extra but I paid enough in to ensure that the amount was sufficient for mortgage cover. When they were taken out there were 3 interest rate/growth levels predicted for the amount people paid in and as with all investment the wording did state the possibility of a low return [value can go up or down]. In addition there was a guaranteed payment on death if that were to happen which I considered to be of particular benefit...not that I did croak ;D From memory about £40/month would reach £22k in 25yrs [pay in c£12k]
I am pretty sure the majority of claims have only been made due to the info and widespread publicity resulting in plenty 'jumping on the bandwagon' by people paying in a minimum looking at the highest level final value prediction and then bleating that the figure isn't going to be reached..........jeeeezus even a woman in a bank who is well versed in investments made a claim. The majority of these claims were made against policies still running so the actual final amount was not known anyway as there was only a 'possibility of shortfall'. If left until maturity many policies would meet the predicted final value but not the highest predicted value....in fact there was a good bit of business to be had by buying part paid policies.
Don't believe they are sold anymore.
anyways that's endowments, mortgages, pensions covered ;D ........ what next on Flys interesting finances thread...which indeed it is 8-)
Squashed_Fly
29-08-11, 11:38 AM
Endowment claims are what I used to work on at C&G, and we found that the majority paid out simply because the sellers, despite the small print, were actively telling people to ignore it as it was guaranteed win.
If you have young people (as more were then when you could actually get a mortgage with a small deposit/100% loan) who don't know any better - first time buyers etc, then it's quite easy as a good sales person to convince someone they're onto a sure thing.
But I do agree Col, there are many people also, who would have known better, that are jumping on the bandwagon. But that's just the way things are. There will always be people out there who will try and try and cheat their way out of doing something.
But there are plenty of honest people out there who were swindled. I've seen the evidence (ie all the notes etc from the sales people after the customers left!) as it's what I had to use to base my decision on whether we would pay out on a claim...
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