Vendor gifted deposit HBOS

neilbrwn

Please help

I have put in an offer for a flat for £108,000. I am being told by my mortgage advisor if I put down 10% (£10,800) the vendor will put down an additional 5% (£5400) giving me in effect a 15% deposit to get an improved rate.

I am being told the mortgage will then be £91,800 when you deduct the 15% deposit but does this not mean the seller is actually only getting £102,600 for the property, or are they still getting the £108,000 in their pocket?

The_Palmist

May be the 5% is an interest free loan to you for a specific period. Check with the vendor and make sure you understand whether its a 5% discount or a loan.

maninthestreet

Please don't tell me that the mortgage adviser has some business relationship with the vendor's EA.

pleasedelete

Well isn't the vendor just reducing the price?

Are you going with a reputable mortgage company?

Even 15 per cent is not a great deposit.

Have you had a mortgage valuation yet?

catieeb06

The vendor would only get £102,600 for the property.

Have you approached the vendor to see if they would accept that? From your post it just seems like the MA has decided it should happen.

pleasedelete

Seems like tbe vendor has accepted £102,600 but you are telling the mortgage company it is £108,00

betmunch

You have it exactly right.

My question would be why is the vendor about to accept 102k when you offered 108k?

Only think I can think of is that the EA are going to falsely inflate the price to invent the 5% you are being gifted so the vendor is not out of pocket. However if this is right then the chances are you will lose out when the valuation is done.

Is the mortgage advisor based in the EA? and does he charge a fee on application? If either answer is yes I would reconsider who you are going to use for your mortgage and then keep things simple

neilbrwn

I am a 1st time buyer and am only able to raise the 10%

the ma gets a fee from whoever we get mortgage with and was a recommendation through a friend that works in a est agent
the prop is valued at £120k and is fixed price £110k but have verbally accepted the £108k

so think there is a no chance of them gifting me £5400

Is the only way round it is to offer circa £113k & they then gift the difference so they are still receiving the £108k?

poppy10_2

neilbrwn wrote: »

Is the only way round it is to offer circa £113k & they then gift the difference so they are still receiving the £108k?

If you don't declare it to the lender this would be fraudulent.
If you do declare it they are likely to take the real selling price as £108k rather than £113k

kingstreet

If you make an offer on a property it is possible to use part or all of a reduction in the asking price as part of your deposit, upto a maximum of 5%. The only lender currently offering this facility on second-hand properties is Halifax.

If you have a look at this thread, you'll see the problem another vendor gifted deposit case is having;-

https://forums.moneysavingexpert.com/discussion/3338360

You must ensure the purchase is worded correctly and that the two solicitors and the surveyor are fully aware of what is happening. The downside is, if the surveyor does not agree the property is worth as much as you need, the thing falls apart and you're back to square one.

Here's an example;-

Asking price £120,000
Vendor is willing to accept £112,000.

The purchase price becomes "£117,900, with 5% vendor gifted deposit, leaving £112,005 to be paid" and this is the wording which is required on the sales memorandum issued by the agent to both solicitors.

You then put your deposit of 10% down, so the end result would look like this;-

Agreed purchase price £117,900
Vendor gifted deposit £5,895
Cash deposit £11,790

Mortgage required £100,215 (85% of the agreed purchase price).

The surveyor must be made aware and value the property at £117,900. If he disagrees with the agreed price, the deposit idea will probably disintegrate in the down-valuation and you'll be back to buying at the surveyor's new valuation figure with a 90% mortgage.

It may be worth it to get an 85% mortgage product rather than one at 90%, you'd have to compare Halifax 85% products with other lenders' 90% deals to be certain.