... So, is this illegal?

Alex_the_worm_king

Hello guys, first post on the board.

Thanks in advance for helping me out.

I'll talk in theory. A friend has a house on the market for 110k but wants to make a quick sale. I can get a mortgage for that... But, like most people, I am struggling for the 10% deposit. The friend selling the house has said to get a mortgage for 100k and the solicitors will sort out the paperwork and just say the 10% deposit has already been paid.

Is this legal? It sounds like it makes sense but also sounds deceiving?

beecher2

No solicitor is going to say a 10% deposit has been paid when it hasn't. So it doesn't make sense, and of course it would be illegal. Wait until you have your deposit and fees saved before looking to buy.

Alex_the_worm_king

But the friend has agreed to sell the house for 11k less than she wants for it, despite it being worth more, which covers our deposit and allows for a sale. Is that still wrong?

blueberrypie

1. There are no 100% mortgages available these days.
2. If the friend wants to sell the house quickly, he/she should reduce the price.
3. If the house isn't selling for £110k, it's not worth £110k. Even if you had a deposit, your lender would want a valuation, and it wouldn't be likely to come up with a value equal to the price the house isn't selling for.
4. If the house isn't selling for £110k, it's not worth £110k. Even if you had a deposit, and even if you could convince a lender that the house was worth £110k, why would you want to pay more than the house is worth?
5. If you can't save the deposit, how are you going to pay for repairs and maintenance?
6. You'd be asking the solicitor to lie to the lender - any solicitor who would do such a thing is a) a fool and b) someone to be avoided (by you, as well as the lender). No way would I trust one of the biggest financial contracts of my life to such a solicitor.
7. The friend is either naive or taking advantage of your naivety. Your call.

dunstonh

Is this legal? It sounds like it makes sense but also sounds deceiving?

Yes it is fraud and there are prosecutions taking place for people that have done this.

blueberrypie

Alex_the_worm_king wrote: »

But the friend has agreed to sell the house for 11k less than she wants for it, despite it being worth more, which covers our deposit and allows for a sale. Is that still wrong?

If the house was worth more, it would sell for more. That's the definition of a property's value: what you can sell it for. She can't sell it for more, so it's not worth more.

getmore4less

Domino9 wrote: »

A house deposit is a deposit on the mortgage not the house.

The deposit goes to the bank for the mortgage and not the vendor for the house.

Is your friend suggesting giving you £10,000 for a deposit?

!!!!!! are you talking about?

beecher2

Alex_the_worm_king wrote: »

But the friend has agreed to sell the house for 11k less than she wants for it, despite it being worth more, which covers our deposit and allows for a sale. Is that still wrong?

LTV is calculated using the valuation, or selling price - whichever is lower. If she's selling the house to you for 100k, you need 10k deposit as a minimum.

Bob_the_Saver

If I were you I'd 'theoretically' bake a cake with a file in it so that it's ready when you need it.
(Not a file with a cake in it, that's different!'

antrobus

Domino9 wrote: »

A house deposit is a deposit on the mortgage not the house.
The deposit goes to the bank for the mortgage and not the vendor for the house.

getmore4less wrote: »

!!!!!! are you talking about?

Quite. The deposit goes to the vendor, and it is a deposit on the house.

As to the original question; no, it isn't bleeping legal. (Which is not to say that this sort of thing hasn't been tried before.)

Alex_the_worm_king

Is it not just like new build properties where the developer offers 5% deposit paid/match? This way money is knocked off the price of the house to go towards deposit. Not all banks will accept this but it is legal, obviously. This seems like a similar situation except the developer is a friend.