5% gift deposit from the vendor

Fay_Ibbott

I've been speaking to a mortgage advisor (whole of market and completely free) about my options considering that I am a FTB and have no deposit.

Initially I was asking about 100% mortgages but he suggested I also consider the possibilty of asking the vendor to 'gift me' a 5% deposit instead of usually putting in a lower offer than the asking price. He went over it briefly but is going to e-mail some further info to look over tomorrow. I have done quite a bit of research about mortgages but have not heard of this before.

Has anyone got any idea how this works and whether it's a good idea? I'll probably know more about it soon, but it's nice to get some other opinions/experiences.

Barney088

It is a perfectly legal way around the issue you face and it happens from time to time. However many lenders will view it as you are getting the property for less. eg £100K property £5K gifted deposit from Vendor, property is actually worth £95K and they will base their lending on the lower figure, you are getting a 100% mortgage.

There are many lenders who will not treat this as a deposit, although there are a few that will.

I'd get your broker to provide quotes on the original request of 100% and a couple of quotes on the 95% with a gifted deposit. Ask if the Lenders are OK with the gifted deposit element. Ensure that they accept the gifted deposit if confirmed by solicitors.

Also worth checking the extra costs on the two quotes. Whilst the interest rate may be lower on the 95% loans there may well be something called a "Higher Lending Charge" which you will have to pay. It's an insurance premium that you pay but covers the lender if you decide not to pay the mortgage. This is often avoided on the 100% mortgages.

Financially go with the best option, there is nothing wrong with gifted deposit. Many new build properties are sold this way to help people just like you.

Good luck

'B'

Hi

I did this 11 years ago,it basically means that everyone gets what they want in a roundabout way without you ahveing to stump up the 5% straightaway. I can't remember exactly how it works now but i remember thinking what a godsend it was at the time.
B