Vendor gifted deposit LTV clarification

bigriggers

Hi all,

My partner and I are currently gearing up to put in an offer on a house using a Halifax 5% vendor gifted deposit scheme. (Yes I know, I know, but we don't want to rent for a minute longer )

I thought I had my sums correct but the estate agent's financial advisor has planted a seed of doubt with regards to what the actual loan amount will be!

So, working on a house price of £170'000, the 5% is £8500. £8500 from us and £8500 from the vendor equals a deposit of £17000. So surely the loan from the bank will be the house price minus the total deposit, ie. £153'000. The way the financial advisor explained it is that the 5% from the vendor does not count towards the mortgage, and therefore the loan would be for £161'000 (170k minus 5%).

Could somebody please verify that I'm not going completely mad! :think:

Thanks muchly.

tyllwyd

Do you have savings of £8500 that you are putting towards the deposit?

If not, surely you are counting that 5% deposit twice?

brit1234

Is it a new build and have you a rightmove link?

betmunch

Your right, he's wrong.

Unless, they are falsely inflating the house price to achieve the Vendor Gifted deposit. If they are doing this, dont bother proceeding, they are tough enough to get through when done correctly, never mind with a blagged valuation on the house.

Check the KFI you are given before you apply, it will have the house purchase price on it.

kingstreet

£170,000 gross price
£8,500 vendor's deposit
________
£161,500 net price vendor receives
£8,500 your deposit
________
£153,000 mortgage requirement

90% mortgage from Halifax.

Memorandum of sale must be worded "£170,000 with 5% vendor gifted deposit, leaving £161,500 to be paid."

Lender has to know about it and both solicitors have to be aware and happy the contract will be phrased like this. The vendor has to be happy with £161,500 too.

If the property does not value up at £170,000, the whole scheme could fall apart if they won't accept the surveyor's valuation, less 5% if it means they get a reduced price.

For example, if the property is valued at £160,000, they may not be willing to accept £152,000 and your valuation fee is wasted.

bigriggers

Thanks guys, as I thought.

I'm aware of the inflation trick and have specifically told her that we are not going down this route! Hopefully the bank will agree with the valution as it is a good price for the road.

JQ.

betmunch wrote: »

Unless, they are falsely inflating the house price to achieve the Vendor Gifted deposit.

Of course they are!

All the vendor will see is their net receipt From their point of view they are selling their house for £161,500. So long as everyone understands that it's fine.

If the house was worth £170,000 the vendors would sell it for £170,000.

tomellingham

I'm in a kind of similar situation...

House Price - 160k
Gifted Deposit - 8k
Deposit - 16k

Mortgage - 136k

Problem is the valuers keep valuing the house at 160 - 8 (the gifted deposit), which is 152, but Abbey (our lenders) will only lend against the valuation price. So effectively we are stuck in a circle. I don't know whether the valuer is an idiot or Abbey are being stupid?

JQ.

They are both being sensible - you are buying the house for £152,000. The vendor gifted deposit is just smoke and mirrors.

Try Halifax - I believe they are the only lender to allow VGD's.

kingstreet

Yep. Most lenders, Abbey included only do vendor gifted on newbuilds, better known as builder gifted deposit.

Only Halifax does vendor gifted on second hand properties AFAIK.

tomellingham - You can point your finger at the "idiot" who is responsible for arranging your mortgage.