Gifted Deposits

aimeelou2

We am in the process of buying a new build house and have been gifted a 5% deposit from the developer. We have paid our £500 deposit on the plot, however we have now been told by our independant financial advisor that almost all of the banks will not recognise this gifted deposit.

Any advise on 90%LTV morgages and bank who will recognise the gifted deposits?

Many thanks.

Robert_Sterling_3

I think a "Gifted Deposit" from a seller may be a "sharp practice".
The true value of the property might be £V
The seller says the true value is £V + £X
The seller makes a "Gifted Deposit" to the buyer of £X

The lender wants the buyer to make a deposit of £D
The buyer wants the £X to be Subtracted from the £D
so that he only needs to pay £D-£X with his own money.

At first sight you might think a buyer would want to pay as little for the property as possible i.e. Would want £X to be nil or very low.

In fact it suits both the buyer & the seller to have £X high.

In fact if £X is £V/10 i.e. 10% of £V
Then £X could almost cover a 10% deposit requirement

( work out for yourself for homework why it does not quite cover it.)

so that what was thought to be 90% LTV was in fact 100%LTV (almost).

To continue ....

If a lot of buyers ( Of a block of flats ) understand this set up they will buy the flats at an inflated price.
Better still LTSD will be paid an the inflated price.
For valuation purposes when valuers look at the sale prices at the Land Registry etc the inflated price will in fact become "the true value".

You may think that I am making this all up ...

Lenders will know that I am not.

silvercar

I have heard the Halifax mentioned as accepting upto 5% gifted deposits.

The valuation does need to stack up, but as Robert_Sterling explained, that often happens.

bdl1brick

I was under the impression that lenders were only lending a max of 75% on new builds at the moment, or has that changed now?

Rossa_3

There have been financial media reports of surveyors under valuing for mortgage purposes on new builds to take into account any potential drop in value in the market that may happen this year.

And I agree with Robert that the gifted deposit is just a marketing ploy. How do I know that is true? I used to work for a property investment firm and that was one of the sales tricks used by the developer to shift their properties. It was also used by the infamous Inside Track as one of their "no money down deals" that pulled a lot of punters in that have now lost everything they had.

Sorry but in property there is no such thing as something for nothing. (same in the car industry). It is ALWAYS built into the price....and yes I used to be a car broker before I was in property so my cynicism is complete!!

Robert_Sterling_3

bdl1brick wrote: »

I was under the impression that lenders were only lending a max of 75% on new builds at the moment, or has that changed now?

This thread is not realy about LTV It is about "Gifted Deposits"

So whatever you say about LTV is OK by me

Cheers.

Robert_Sterling_3

Rossa wrote: »

...and yes I used to be a car broker before I was in property so my cynicism is complete!!

I am admitting nothing

gordano_2

My understanding was the the CML (Council of mortgage lenders) updated their code to exclude gifted deposits in 2008.

My STRONG advice would be to declare this up front even if it is not clear whether it is accepted by the mortgage lender ... otherwise you could fall into the category of committing mortgage fraud. ... make sure you put it into writing to your mortgage broker that you are being gifted the £500 deposit ... that way you should be protected if the lender subsequently finds out and tries to take action. I don't wish to be alarmist about this but the FSA are becoming increasingly focused on mortgage fraud.

Robert_Sterling_3

I call it "sharp practice" rather than "fraud" to avoid possible defamation.

Cashpig74

its fraud - trust me.

only 7 firms were acceoting gifted deposits in 2006 - i wonder why.. and I have been informed by the fraud squad that these are not lawful measures - well that and using a so called discount as a deposit. a valuation is not tangable - its an opnion based on market prediction. Once a sale price has been agreed, then percentages can be equated with reference to loan to value etc...