Vendor Gifted Deposits & Home Report Values

peld

We are currently looking for a house, and saw a nice one at the weekend, and going to see it again later this week.

We have a deposit together (very max 15%, though ideally 10% so we have cash for furniture and things we might want to do), and had been set on the RBS/Natwest 2 yr fixed deal for the 10% (5.69%) for which we have an AIP for what its worth.
NB We also own two other properties so arent eligible for a few deals (one will be sold once we are moved).

Anyway, the estate agent for whom this house is one with gave me a ring and gave me the chat about their mortgage broker - i just stated the deal im looking and said "beat that".

They came back with this "gifted deposit" scheme. Basically, say the house we are looking at has a value of £200,000 in the Home Report (forgot to mention we are Scotland), and the vendor accepts an offer from us of £190,000. If the vendor agrees, they can say they "gifted" us the extra £10k, so it was "sold" at £200,000.

Therefore our 10% deposit on £190k was £19,000. Now, because the vendor "gifted" £10k, we only need another £1,000 to get a £30,000 deposit together and therefore qualify for an 85% mortgage. They said the Halifax and Lloyds allow this and the rate would drop to 5.09%.

Has anybody done this before? Im a bit skeptical to say the least, especially because I owe the bank essentially the same amount (slightly less actually, £171k/£170k, in this example) but am paying a lower interest rate (about £70pm lower with the quoted rates).

Interesting to hear any views and if someone has used this before.......this was from a broker at a large estate agent chain.

kingstreet

Halifax accepts vendor gifted deposit business. I'm not sure about Lloyds though as I'm pretty sure C&G doesn't. Could be worth checking.

As it's Scotland, will you be able to rely on that report, or will the lender want a separate valuation? If they do want another, it could all come crashing down if the surveyor doesn't agree with the £200k valuation.

If the worst comes to the worst, as long as he values it at £190k you can go back to your current plan, I guess.

Hopefully one of the Scots specialists will be along to clarify.

peld

in speaking to Natwest, they said they would use the Home Report valuation if done within last 3 months, or we could ask (pay) the vendors surveyors to update the valuation section (as its cheaper than doing a valuation from scratch).

the broker did say both Lloyds and Halifax do this.

im just worried if we took it up and applied, then there is an issue with the valuation or something, that then might impact our back-up.

kingstreet

I can't see a Lloyds TSB Scotland Spearhead product on Trigold which says vendor deposit is acceptable, but that might not mean too much.

I can't see how it would affect your back-up, apart from any fees you'd paid might be wasted, and I'm only really thinking of a valuation update fee here.

peld

kingstreet wrote: »

I can't see how it would affect your back-up, apart from any fees you'd paid might be wasted, and I'm only really thinking of a valuation update fee here.

Thanks - my concern would be would whether two mortgage applications in quick succession would affect our credit record.......

Hooley

Hi

Did you find out whether Lloyds offered this ? Looking to buy a house and Halifax have said they'd accept a 5% gifted deposit but we'd have to match it with 5% of our own....just wondered what Lloyds said

Cheers

peld

Hooley wrote: »

Hi

Did you find out whether Lloyds offered this ? Looking to buy a house and Halifax have said they'd accept a 5% gifted deposit but we'd have to match it with 5% of our own....just wondered what Lloyds said

Cheers

We havent followed this up anymore, and are going to go with our original mortgage (Natwest)

Our view was it seemed a little dodgy - surely every mortgage broker and vendor would be trying to push this if it was all above board ? I also don't see how a lender woudl just happily accept this and do themselves out of a 0.5% rate cut?

AngelaUK

I had a 5% vendor gifted deposit agreed with Halifax a few years back, had a full mortgage offer but my sale fell through so lost the property, not sure if it would be as easy now but should be possible.

Conrad

One thing I wanted to mention is why people 'want' a mortgage with just about the worse lender out there, Natwest / RBS? This is the very same that was minutes from going bust until the Gov't stepped in. Common sense would inform you that such a lender will be very fussy (they have billions in bad debt on thier balance sheets) and in any event they always were a big nasty Bank with big nasty Bank service.

Maybe I'm a news nerd and just expect others are the same - perhaps people do not follow the news so do not realise the problems RBS / NWest had? They were one of the key architects of this credit crunch and the resultant recession. I thought people hated Bankers for this?

peld

Conrad wrote: »

One thing I wanted to mention is why people 'want' a mortgage with just about the worse lender out there, Natwest / RBS? This is the very same that was minutes from going bust until the Gov't stepped in. Common sense would inform you that such a lender will be very fussy (they have billions in bad debt on thier balance sheets) and in any event they always were a big nasty Bank with big nasty Bank service.

Maybe I'm a news nerd and just expect others are the same - perhaps people do not follow the news so do not realise the problems RBS / NWest had? They were one of the key architects of this credit crunch and the resultant recession. I thought people hated Bankers for this?

Firstly, ive dealt with Natwest for over 10 years and thought their customer service is very good.

Secondly, the fact they are government owned means they are essentially gilt edged and the safest bank in the UK. Furthermore, being Govt owned they have an incentive to offer (responsible) affordable lending to kick start the property market and increase thier own taxes.

Thirdly, the reason RBS went bust had nothing to do with mortgage lending in the UK or anywhere else for that matter. Their meltdown was because of some atrocious acquisitions, notably of ABN AMRO, and the investments they held and underwrote as part of their investment banking arm - nothing to do with thier retail business.