Deposit question for first time buyer

spongebrad

Hi, I'm new to this so be gentle. I currently live in a rented property with my partner. We have lived here for 2 and half years and are happy with the property and our intention was to stay here whilst we save for our deposit which would take a further 2 to 3 years.My landlord is sound and I get the impression he is not short of a bob or two.
My landlord has approached me with a proposition which isn't instantly sitting right with me and I am suspiscious it wouldnt be allowed. This is how he has explained it to me

He said he is interested in selling the property along with another one he rents out but doesn't want to sell it from under us as I told him we are happy here. He said if he was going to get the property valued and he was advised to take offers between 120,000 and 130,000 he would sell it to me at an agreed price between the two of us. I explained that I wasnt in a position with a deposit so he said if I paid the full top value of the home he would give me 13,000 for the deposit. Meaning the house would really be bought for 117,000 and in his words he said he would take the hit on the 3 grand as he has a lot equity in the house. However if I wanted a lower mortgage and wanted to buy the property for 120,000 he would still give me the 10% however this would be a loan which I would pay back through a verbal agreement over an agreed period of time.

He seem quite genuine and although we've only met on one occasion as he lives many miles away we speak on the phone reguarly and nothing is too much trouble when it comes to the house

My questions are is this legal? and what are your thoughts.
Any mortgage specialist views would be appreciated

Thank you

kingstreet

This is known as a vendor gifted deposit case. Unfortunately, VGD ended with the last mortgage lender to accept it, Halifax, pulling out of the market for it at the end of July.

You will need to employ a solicitor who will have to collect a deposit from you in advance of exchange of contracts. This precludes any "shenanigans" around the deposit. Your mortgage lender will also ask for evidence of deposit during the application process and you would be unable to comply with this...

AskMeAnother

Ok, the difficulty you will have here is being able to actually get a mortgage based on the source of deposit.

Halifax used to accept deposits paid by the Vendor, but they stopped this 2-3 months ago if i recall correctly.

The solicitor will also ask for source and proof of deposit as part of their Money Laundering checks, so it's not as if you can even "play dumb" with a lender.

With regard to the owner giving it to you as a loan - well there's nothing illegal about it, but again if you were to reveal the true source of deposit to a lender it would be unlikely they would allow it.

There is now a 100% mortgage available, but it requires a parental guarantor. If you're parents are in a position to help, and you can afford the repayments of course, this maybe something worth considering for you.

Good luck!

spongebrad

Thanks for that. To clarify...If I had the money in my bank acc at the time of application (therefore could provide proof) but being open and honest would tell the mortgage company that this was a 'gift' from my landlord it would be unlikely that they would approve this??!!??

AskMeAnother

Correct, no lender currently accepts vendor gifted deposits as far as I am aware.

somethingcorporate

There would be nothing stopping you doing a runner with the money at this point so the landlord would have to be bonkers to transfer you so much money!