Vendor Gifted Deposits

Si_and_Lynz

Sorry if this has been posted on here in another thread, but Ive been reading for over 2 hours now and Im still confused - i need specifics to my circumstances.
We are FTB who have made an offer on a property and it has been accepted.
The property was on the market at 79950 with5% vendor gifted deposit paid. We offered 75k providng the 5% deposit was still gifted and this was accepted.
I have now gone to Halifax who say that the way they see it is the house price is now reduced to 71250, and on the 93% mortgage we opted for we would therefore be having a mortgage for 69112 with us paying a further 3% deposit. I am happy with this, however, after speaking with the estate agents, they say this is wrong, and the mortgage amount is for 75k and that the vendor will pay 5% deposit for us meaning we would effectivley be getting a 100% mortgage on the remainder.

Who is right? Everyone seems to be saying slightly different and I need to work out my budget and know exactly what is happening, im getting so stressed by this I am considering just pulling out of the sale full stop as there seems to be no set rule about this gifted deposit and it just seems to have opened up a whole can of worms.

Please can someone help break this down for me? Im so confused!!!!

turbobob

I've always found it very confusing TBH.. If you offer "£75k with 5% vendor gifted deposit" does that mean the official selling price (what goes on the land registry records) is £78947 or is it £75k? If the latter then the offer you are actually making is £71,250.

Anyway you should probably have a read of this thread - http://forums.moneysavingexpert.com/showthread.html?t=956789 It seems the estate agent is being pretty shady by advising you to use this to effectively get a 100% mortgage. My understanding is if you don't tell the lender about the gifted deposit, its mortgage fraud.

Si_and_Lynz

turbobob wrote: »

I've always found it very confusing TBH.. If you offer "£75k with 5% vendor gifted deposit" does that mean the official selling price (what goes on the land registry records) is £78947 or is it £75k? If the latter then the offer you are actually making is £71,250.

Anyway you should probably have a read of this thread - http://forums.moneysavingexpert.com/showthread.html?t=956789 It seems the estate agent is being pretty shady by advising you to use this to effectively get a 100% mortgage. My understanding is if you don't tell the lender about the gifted deposit, its mortgage fraud.

Thanks for your reply.

I assumed it to be that we will actually be paying 71,250 for the property and that themorgage would stand as normal then with Halifax (as halifax explained it to me also)
I read the thread and it still seems to make no sense to me tho (im not the brightest spark in the box tbh) however i do want to make sure I fully understand what Im getting myself into...I have told Halifax in no uncertain terms that the arrangement is 5% gifted deposit, the problem with Halifax is that if you take the option of free conveyancing fees you use their solicitors - so I have noone to go to to discuss this with.

This is becoming so confusing its rediculous! And now Im concerned that if this is how the estate agents have put it to me what impression is the seller under? What if they are of a differing understanding to me? This could get so messy!

Incisor

Gifted deposit? Avoid. If you buy at 75k with a 5% gifted deposit, you pay £71250, and the value is therefore 71250, so your mortgage is a percentage of 71250.

The reason is, if you can buy it for 71250, the banks [rightly] calculates that no one would pay more for it, so that is the value.

EdInvestor

Gifted deposits are a way of trying to pretend that the price of the property is higher so that the bank lends you 95% of X plus gifted deposit rather than 95% of just plain X, so that you end up with a bigger loan.

As you know banks are very strict on how much they will lend at present, meaning that many FTBs don't have a big enough deposit, so it's a way of trying to get around that.

The banks have now figured this out now, and have instructed the solicitors who represent both you and them to nip it in the bud.So it won't work.You will just end up with a smaller mortgage offer which perhaps will mean you can't proceed.Best not to get involved.

silvercar

Some lenders will accept gifted deposits and some won't; some will if the property values (as valued by the surveyor for the mortgage company, not by the estate agent eyeing his commission) at high enough.

So if you say 75k to include a gifted deposit of 5%, you pay 71.25k and the seller gifts you 2.75k. If Halifax are prepared to give you 93% mortgage that would be 69.75, leaving you to find 1.5k PROVIDED THE PROPERTY IS VALUED AT 75K and that Halifax will accept a gifted deposit.

nickhenderson1_2

Just thought I'd share what happened when I recently purchased using a "vendor gifted deposit"..

I purchased the property from my mother-in-law, and the house was valued at 115k by the surveyor who came out on behalf of the mortgage company.

MIL agreed to let us have 10% off whatever the house was valued at, which worked out at 103,500. We then got a mortgage for this amount based on 90% LTV.

We were happy with this, BUT both our solicitors and mortgage company (A&L) stated that the purchase price on the Land Registry documents would have to go down as £103,500. In effect, we were having a 100% mortgage even though the mortgage rate was fairly competitive and was based on a 90% LTV.

Apparently, the whole vendor gifted deposit thing is a grey area and to put down £115k on the transfer deeds in our case would have "constituted mortgage fraud, according to the law society" (our solicitors words).

Anyway, like you, we were given the runaround by our lenders/solicitors/mortgage advisor, all of who gave different figures. In the end, it turned out as the above.

delboypass

The CML is cracking down on these deals now.
What you pay is the price that should go down on the land registry..

Otherwise I could claim my 1 bed fla is worth a million pounds cause they gave me £900,000 off..??

What you pay is market value...

Si_and_Lynz

Ok so in a nutshell my mortgage company (Halifax) is right?
Therefore I simply ignore the term girfted deposit and take it that the house is being sold at 71,250 and this is what i get my mortgage on as normal.

It now all depends on the surveyor finding the house is worth 71k? or 75k? beacuse as far as i can see, so long as the surveyor finds it to be worth 71k then all is fine?

Sorry about this, Im new to the housing market and very inexperienced!

I appreciate everyones help on here!

poppy10_2

From your original post, it seems like the EA wants to keep the overall price at £79k, give you £4k gifted as a deposit, meaning you essentially are paying in total £75k total (from your mortgage)


Whereas you seem to think you are paying £71k for the house, as you have negotiated the overall price to £75k, and still get 5% deposit paid by them. Meaning you would be paying £71k in total (from your mortgage and your own 3% deposit)

Which makes it sound like the EA hasn't really agreed to the reduction at all. Have I got this straight? It's very confusing.

Si_and_Lynz wrote: »

after speaking with the estate agents, they say this is wrong, and the mortgage amount is for 75k and that the vendor will pay 5% deposit for us

Si_and_Lynz

poppy10 wrote: »

From your original post, it seems like the EA wants to keep the overall price at £79k, give you £4k gifted as a deposit, meaning you essentially are paying in total £75k total (from your mortgage)


Whereas you seem to think you are paying £71k for the house, as you have negotiated the overall price to £75k, and still get 5% deposit paid by them. Meaning you would be paying £71k in total (from your mortgage and your own 3% deposit)

Which makes it sound like the EA hasn't really agreed to the reduction at all. Have I got this straight? It's very confusing.

I hadnt thought of that
we offered 75k providing they honoured the 5% gift deposit. Thats was almost our exact words to the EA which is the offer that was accepted. This is exactly the way i worded it to Halifax also. Youve shed a whole new light on this for us now...Id never thought the estate agents could have taken our offering price as a final price after the 5% deposit has been deducted from the original asking price!
Back to the estate agents on monday I think! :doh: