Can Buy a Parents House with no deposit

JJHOUSE_2

Hi All,

I have little deposit despite earning a good wage due to renting.

A parent has offered to sell their house (they don't live in it) for under the market value

Do the banks treat this as a deposit as your mortgage is less than the value of the house?

Has anyone any experiences or advice,

Many Thanks

Hopeful

GMS

This should be fine. It would be classed as a 'gifted deposit' and would require your parent to sign a letter stating non refundable and that they will have no further interest in the property. Independent Legal Advice for the parent would probably be recommended too.
In theory it is possible and depending on the sale price you may get a decent low LTV rate.
You would be advised to speak to a broker though who is 'Whole of Market'

JJHOUSE_2

Hi,

Thanks, should I tell the Bank what we are doing or will they then value the House at what my mother sells it to me for?

GMS

You need to find a lender who will allow the family undervalue sale. Most will allow it.
Basically if you were to buy from Joe Public at a massive discount the lender would lend against the lower figure. Because you are buying from a family member they will class it as the deposit being gifted to you, as it would be if they were to pay you the cash, and base lending against he value of the property.
As your parent does not live there then there is no need for the lender to insist they move out, and of necessary you could provide the address your parent lives in now to prove they will have no interest in the property in completion. You may need to purchase 'Title Insurance' or a similar indemnity, which costs around £150.
Do not try to do it without telling the lender as it will fall apart on completion. The solicitors follow rules set down by the lender and would need to check an undervalue sale was allowed.
It is pretty straightforward really, just a bit more work needed.

Thrugelmir

If this a second property. Then your "parent" will assessed for CGT on the market value at the date of sale not the purchase price.

GMS

Unless they are an MP in which case 'flipping' will have been done!! There are scenarios where CGT would not apply.

JJHOUSE_2

Hi All,

Co-op
First Direct and
Britannia all said no to the gift of equity from a parent

Any suggestions?

GMS

Go to see a broker and seek proper advice. If you keep trying lenders you will take up a lot of your time.