First time buyer

mestew

I am looking for a bit of advice on this, The basic outline is that i am looking at buying my mum's house from her, she will be selling under market value, so will only need to take out a 70-80% mortgage on the house value. The problem is i dont have the capital yet to put down as a deposit, will the reduced selling price act as my deposit?

Example:
House valued £300K
selling house £200K

SilverSix

As far as I know, no.

Because you don't have any actual money. I'm not sure if a 'gifted deposit' could come in to it but you would still need your own.

The only way I can think of is her to release some equity and then give it for you to then give back to her as your deposit.

From a lenders perspective I assume it doesn't really matter if the house is undervalued as you have zero deposit and are a massive risk. On the other hand should they reposes they could make a tidy profit (haven't a clue how repossessions work or if they just sell to the sum they are owed?).

Wh05apk

I think Nat west still allow this, did a couple like this a while ago, make sure they are aware no funds will be paid by you (they may require you to pay a nominlal 5% or so?) and ensure that your solictor is aware from day one, otherwise they will get to a week before completion ask you for the funds, then have to get confirmation from the lender, which could take a few days and delay things.

Jenniefour

Would you not already have the deposit in the form of the remaining equity in the property? If you are buying it for 200k and need a mortgage of 80% of the 200k (160k), then that leaves 40k equity in the property at the price agreed with your mother.

GMS

Buying at undervalue from your mother should be possible assuming your mother wil not reside in the property after completion.

Essentially a gifted deposit in the form of equity.

Use a broker or make sure you disclose to the lender exactly what is happening.

mestew

Whats the implications if she was to continue to stay there even though i now became the owner taking all responsibility for the property ?

Jenniefour

mestew wrote: »

Whats the implications if she was to continue to stay there even though i now became the owner taking all responsibility for the property ?

It would be helpful if you would say what the purpose of buying your mothers property is - does she need some more income, for example.

There may be other ways of achieving the same goal - whatever the goal is - than you buying her property. What I assumed when I read your first post is clearly not accurate so my first response, and the responses from others, may now not be either accurate or helpful.

Jojo1daffy

I read something surrounding mortgage fraud about this...... A businessman in Manchester got caught up in a scheme where they did this with off-plan apartments - he actually published an email from his mortgage advisor that told him what to say and not say to the lender... give me a mo let me see if i can find the link because that may have some implications on how this transaction could be seen......

http://www.thisismoney.co.uk/mortgages-and-homes/buy-to-let/article.html?in_article_id=488240&in_page_id=56

A 'discount' was negotiated but he didn't declare the discount when he applied for the mortgage.

Jenniefour

Jojo1daffy wrote: »

I read something surrounding mortgage fraud about this...... A businessman in Manchester got caught up in a scheme where they did this with off-plan apartments - he actually published an email from his mortgage advisor that told him what to say and not say to the lender... give me a mo let me see if i can find the link because that may have some implications on how this transaction could be seen......

http://www.thisismoney.co.uk/mortgages-and-homes/buy-to-let/article.html?in_article_id=488240&in_page_id=56

A 'discount' was negotiated but he didn't declare the discount when he applied for the mortgage.

I very much doubt whether this applies to the OP, unless his mother is a property developer. There is not a 'discount' of the type referred to in the article.

mestew

Sorry, i never gave more details.

I am buying the house from her as its the house which i want to stay in and bring up a family in.

She is willing to sell it to me as i am the only family member interested in the house and she would rather the house stayed within the family. Nothing to do about income, tax dodging anything just plain and simple i have grown up there and plan to spend my life there

Jenniefour

If you're actually going to live there with your own family, which will include your mother, then I can't see it being a problem. Normally a condition of a residential mortage (rather than a BTL) is that you are going to live in the property yourself.