Vendor Paid Deposit

ljp507

Hi folks,

I'm a newbie so appologies if there is another recent thread of the same nature, feel free to bump this across if there is!

Just wanting some advice if anyone has any...

My partner and I are looking for our first house and mortgage (eek!) we're mid way through saving and have found a vendor paid deposit of 10%, does anyone know if any banks will accept this and if we will have to contribute any deposit towards it ourselves (i.e to make it up to 15%) or if we could just use the vendor deposit?

Ideally we'd probably go with a bank like Natwest or HSBC as I'm an advance customer (for all that counts for ) and they do some ok low deposit mortages, but I've read old threads saying only Halifax will take a vendor paid deposit (but these were posted a few years ago).

We've both got good credit and have a bit of a deposit but not alot, so I'm hoping the situation is better not worse!


Any ideas? Advice?


Laura

JonnyTwoToes

Does the bank have to know?

starnac

i can't quite remember how it works but a vendor paid deposit is a paperwork exercise. Say the house is up for sale at £80k the vendor agrees to accept £72k (80k minus the 10% deposit) the sale contract will say that you bought the house for £80k and the vendor will give you £8k on completion.

The end result is that you get a mortgage for £72k the vendor gets the £72k they agreed but the bank is happy that there was a 10% deposit. not quite sure how it actually works but it's a paperwork thing that solicitors do if I remember rightly.

I may not have explained it very well and hope that someone who understands it properly will come along shortly and explain it better

JonnyTwoToes

starnac wrote: »

i can't quite remember how it works but a vendor paid deposit is a paperwork exercise. Say the house is up for sale at £80k the vendor agrees to accept £72k (80k minus the 10% deposit) the sale contract will say that you bought the house for £80k and the vendor will give you £8k on completion.

The end result is that you get a mortgage for £72k the vendor gets the £72k they agreed but the bank is happy that there was a 10% deposit. not quite sure how it actually works but it's a paperwork thing that solicitors do if I remember rightly.

I may not have explained it very well and hope that someone who understands it properly will come along shortly and explain it better

This can work with lower valued properties as the mortgage has to be within the LTV agreed on a correct valuation of the property.

Can anyone advise if this is 'legal' or if it's better to have this arrangement through the vendor and buyer only?

GMS

The purchase price needs to be correct as this will be reported to Land Registry. The solicitor will need to be satisfied with the source of the deposit.

If the deposit is a vendor gift then it needs to be declared to the lender who may or may not accept it.

If the deposit is by way of cash back from the vendor upon completion then the case wil not complete as there was no deposit prior to completion.

Trying to do it would be a dangerous game and could have consequences for future applications should the lender choose to report it.

ljp507

starnac wrote: »

i can't quite remember how it works but a vendor paid deposit is a paperwork exercise. Say the house is up for sale at £80k the vendor agrees to accept £72k (80k minus the 10% deposit) the sale contract will say that you bought the house for £80k and the vendor will give you £8k on completion.

The end result is that you get a mortgage for £72k the vendor gets the £72k they agreed but the bank is happy that there was a 10% deposit.

I'd be pretty happy with that, just not sure if the bank would be as pleased!

Re: GMS,

I'd have to check with the vendor but as far as i am aware it isn't cash back on completion.

Does anyone have experience of getting a mortgage accepted with only a vendor paid deposit?

betmunch

Another thing to watch for with these things is that the house must actually be worth the higher price. To follow up with the earlier example, it is no use marketting it at £80k when it is only worth £72k just so that you can claim the vendor gave you £8k as deposit.

The surveyor will be informed and will need to agree that the property really is worth £80k and not the £72K that the vendors will recieve. In my opinion this is unlikely at best, but could happen.

Finallly you will have the problem of finding a lender prepared to accept a 10% Vendor Gifted Deposit. Has your mortgage broker suggested anyone?

TMSL

Neither of the banks that you are intending to use will accept a vendor gifted deposit.

kingstreet

Halifax only. Maximum 5%.

ljp507

Thanks for the feedback so far, we are waiting to hear back from an mortgage advisor today / tomorrow but I thought it would be best to test the water!

I think the house is fairly priced but certainly isn't overpriced, but from what i gather elsewhere the bank might be inclined to think of it that way if a vendor paid deposit was involved. Not sure how true that is though.

Leon_W

Nobody will accept a vendors gifted deposit apart from Halifax and then it is limited to 5%.

It is also my belief that, of late, Halifax have these downvalued by, you've guessed it, 5%.

Any recent reports of them accepting a vendors gifted deposit without downvaluing the property would be appreciated !