Vendor Paid Deposit

kingstreet

In my experience, EVERYONE has to understand the process. From the data processor at the lender's call centre, through all the estate agency staff, both solicitors, the purchaser, the vendor and the surveyor.

Often VGD cases fall apart because someone gives the surveyor the net figure when he goes to do the valuation. The surveyor MUST know the gross price and that it is a vendor gifted case.

ljp507

Thanks for the info so far... this has turned out to be quite frustrating!

I don't really understand why lenders don't like the vendor gifting a deposit, especially when the house price is low (in this case under 100,000) and aimed at first time buyers. I get that they don't want inflated house prices but i still don't understand why they're so unhappy about it. But then again, I don't really get why estate agencies would suggest this as an incentive if you can't do anything with it! :huh:

Alas, as I do not make the rules, there isn't much to be done other then speak to the mortgage advisor and it seems, go pay the Halifax a visit (and of course keep saving ).

Dave_the_Ginger_Cat

ljp507 wrote: »

I don't really understand why lenders don't like the vendor gifting a deposit, especially when the house price is low (in this case under 100,000) and aimed at first time buyers. I get that they don't want inflated house prices but i still don't understand why they're so unhappy about it. But then again, I don't really get why estate agencies would suggest this as an incentive if you can't do anything with it! :huh:

They aren't keen as it means that the borrower has not saved up the deposit and does not typically have a cash stake in their own house.

Lending stats show that the larger a stake customers have in their own house, the better they are likely to repay it.

Some the aversion to this dates back to the mid-90s when new builds had 5% vendor paid deposits. New builds don't always hold their initial value in early years, and coupled with the repayment profile of customers doing this, can easily make for a shortfall should a sale be necessary.

poppy10_2

ljp507 wrote: »

I don't really understand why lenders don't like the vendor gifting a deposit

Because in the vast majority of cases, the 'deposit' is completely illusory. The vendor just inflates the selling price by 10% and then claims he is "gifting" the 10% to the buyer. It's a con that banks were happy to turn a blind eye to in the bubble years, but now most of them won't fall for it.

R6Nick

Hi there

Just thought I'd add what I can to this.

My partner and I have just bought our first house using this scheme with the Halifax and was very straightforward.

Our Mortgage adviser knew of the scheme and explained it to us, he also put us in touch with a solicitor who was happy to deal with it (as not all are) because they need to know exactly how to word it.

The surveyor had to do a home report refresh (we're in Scotland) and the value of the house was higher than the amount it was being sold for.

We paid 10% Deposit and Halifax gave us another 5% which makes a huge difference in interest rate.

I dont believe Halifax are the cheapest but when you consider 85% mortgage the rates make up for this.

So I would recommend this providing the people you are dealing with know how to administer it and are experienced in doing so.

Halifax were also very speedy at making the decision in principle then the full mortgage application approval.

Also the seller has to agree to it as well but if explained properly to them they will understand.

Hope this helps.

Nick

Credit-Crunched

Leon_W wrote: »

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 !

Our purchase price was 108,000 = 5% vendors gifted so actual pp was 102,600.

Valuation came back in from Halifax, you guessed it

102,600 on the nose!

betmunch

Credit-Crunched wrote: »

Our purchase price was 108,000 = 5% vendors gifted so actual pp was 102,600.

Valuation came back in from Halifax, you guessed it

102,600 on the nose!

That is whats going to happen 90% of the time.

I think R6Nick is one of the lucky ones.

kingstreet

Credit-Crunched wrote: »

Our purchase price was 108,000 = 5% vendors gifted so actual pp was 102,600.

Valuation came back in from Halifax, you guessed it

102,600 on the nose!

I'd have you a £1 bet that if you track through the people the surveyor had contact with one of them will have told him the purchase price is £102,600. People just don't understand the importance of the issue. More often or not the vendor is the weak link as they haven't been properly briefed.

I reckon the ones where the agent hold the keys and gives the surveyor access are the ones that go through easiest.

ljp507

R6Nick wrote: »

Hi there

Just thought I'd add what I can to this.

My partner and I have just bought our first house using this scheme with the Halifax and was very straightforward.

Our Mortgage adviser knew of the scheme and explained it to us, he also put us in touch with a solicitor who was happy to deal with it (as not all are) because they need to know exactly how to word it.

The surveyor had to do a home report refresh (we're in Scotland) and the value of the house was higher than the amount it was being sold for.

We paid 10% Deposit and Halifax gave us another 5% which makes a huge difference in interest rate.

I dont believe Halifax are the cheapest but when you consider 85% mortgage the rates make up for this.

So I would recommend this providing the people you are dealing with know how to administer it and are experienced in doing so.

Halifax were also very speedy at making the decision in principle then the full mortgage application approval.

Also the seller has to agree to it as well but if explained properly to them they will understand.

Hope this helps.

Nick

Thanks for this Nick. Spoke to Halifax yesterday and they were very good with it all. The advisor I spoke to said that they cap the vendor deposit at 5% (as said on here) but that they wouldn't have a problem accepting it. The rates advertised weren't much different to HSBC from what I can recall, but would probably be improved by a broker (?)

However, I'm still a bit concerned that as the surveryor knows this when they go to value the house, it will be reflected in the price.

Credit-Crunched

kingstreet wrote: »

I'd have you a £1 bet that if you track through the people the surveyor had contact with one of them will have told him the purchase price is £102,600. People just don't understand the importance of the issue. More often or not the vendor is the weak link as they haven't been properly briefed.

I reckon the ones where the agent hold the keys and gives the surveyor access are the ones that go through easiest.

Good for me, getting the price at 5% less then reduced value.