Vendor Gifted deposit

johnmd

Hi, looking for some info on this as it seems very difficult to find.

This is not the same as the scenario in which you pay 105k for a 100k house then the vendor gifts back the 5k.

This has been explained to me as, home buyers report vlaue of 100k, buying the house for 80k.

This leaves a 20k difference between valuation and cost.

Say I have a deposit of 10%, the adviser I'm speaking to suggests that some lenders (halifax basically), will allow a further deposit of up to 5% to come from the 20k difference between cost price and valuation.

This changes the deposit to 15% and hence lower rates.

From the information presented to me I can't see a downfall, however, if it looks too good to be true, it normally is.

This is in Scotland if it makes a difference and figures above are just for illustration. I can only find info on the paying more than the house is worth and getting some back type, not the scenario above.

Any help would be greatly appreciated.

Meeper

Hang on.

I read this as the property being worth £100,000 and your purchase price being listed at £80,000. That is not a discount or anything like that, it's a sale at under value. Your deposit will be the only deposit that should be counted in this case, so if you only have a 10% deposit, you should be limited to 90% mortgage.

If, however, the vendor is a relative, for example, there are different rules and they may gift you a portion of the deposit.

So - why are you getting a house worth £100k for only £80k?

silvercar

Why will a valuation come in at 100k, if the sellers are accepting an offer of 80k? If it is really worth 100k, why aren't the sellers looking for a higher offer?

johnmd

I'm talking about the home report valuation.

It's not a relative and as above, figures are for illustration only.

I don't fully understand how it works either, hence asking here.

CloudCuckooLand

The home valuation report is just a guide. It is not gospel. Do not get talked into paying that, if you do not think it is worth it.

There is no "pay £105k for a £100k house" mechanism. If the home valuation report said £100k, the lender would follow that. If it said £105k, you could get £5k/5% gifted, if the vendor agreed. making you feel you had paid £100k for it.

Getting it cheaper than the home valuation is allowed. And you should try to do so.

In the £80k instance you mention, as the home valuation is much higher, then you could in theory agree with the vendor a selling price of £85k, so they can "gift" 5% to top up your 10% deposit into a 15% deposit.

Frankly, if to the advisor cannot make it clear, when they know the whole picture, I would find another advisor.

But that all depends on picking a lender who will allow gifted deposit - which are few and far between. Check that their 15% deal is better than the market's best 10% deal...it might not be.

johnmd

The advisor has made it clear, I just don't believe him.

It is not the same as the vendor agreeing a selling price of £85k, the money doesn't change hands anywhere, it's only imaginary from what I can see, using the difference between the selling price and the home buyer valuation for this imaginary 5%.

The rates are 4.6 against 5.8ish between the 15% and 10% mortgages.

If I can believe the advisor everything sounds perfect.

CloudCuckooLand

All the figures would have to be laid out for a lender to agree. If not, then its leaning more towards some dodgy advisor dealings.

So while the vendor may not lay out any cash it would have to be a £85k (ish) sale, with 5% gifted deposit bringing that down to an effective £80k (ish) left for you to find between mortgage and deposit.

You supply 10% deposit making the mortgage £72.5k (ish)...

You say the figures are hypothetical. So I'd worry about it when you find a property that has a 20% discrepancy between the home report and what the vendor will take...

johnmd

I've got the exact property.
Home report value of 200k, use 185k as the purchase price (not 20%).

My 18.5k 10% cash deposit, 9250 as this extra 5%, 157250 mortgage.

The way you are talking about, and all I can find out online, is that I'd pay 194250 then be gifted the 9250 back, this is not what I am talking about.

I have been advised that halifax will allow the difference between the home report valuation and the purchase price, up to a total of 5% of purchase price, to be added to the deposit.

I'd appreciate some impartial advice on it but can I make clear again that this is not the type of deal that is being referred to in previous posts, vendor gifted deposit may be completely the wrong term, this is only what the adviser called it.

silvercar

So whose paying the deposit? Your not, the vendor's not, so who is?

All deals where you are not paying full price but you want the mortgage based on the full price have a "gift" of the deposit from the vendor in that they are selling to you for less than the alleged true value and so are gifting you this virtual difference. Not a cash back where you get real money in your pocket, but accepting a lower value than the true price is a gift to you from the vendor as they are the ones accepting less money for the property.