What is the point of vendor gifted deposits?

Barbie18

I'm sorry if this sounds silly, but I don't "get it".

I can understand why a family member would gift a deposit to help a loved one buy a house, but why would a vendor do this? Why don't they just reduce the asking price instead? Or is it just another method by which our country keeps house prices artificially high?

Barbie18

Or is it simply to increase the "buyer pool" to include those that perhaps don't have much in savings, thereby ensuring a faster sale?

Thrugelmir

Vendor gifts are a way of disguising actual sale prices.

gazfocus

An EA tried to sell us on the idea of vendor gifted deposits when we first started thinking about buying a house. It seems there are very few lenders that allow them and it all sounded a bit iffy to me.

You basically pay a higher price for the house and the vendor gifts you the difference between effectively the inflated price and the actual market value. The idea is aimed at those with very little deposit to get better rates I believe but given lenders are wise to it makes it pointless.

poppy10_2

People used to do it to defraud the mortgage lenders. Worked back in the day when they were lending to anyone with a pulse, but standards have tightened recently.

holly_hobby

They could (and were) very effectively used to obtain the purchaser a 100% mge they wouldn't ordinarilly been able to obtain, or to get 100% lending at std i.e 95% lower pay rates. They were and could also be used as a general kick back for SDLT fees etc.

Private Vendor gifted deposits are no longer accepted. The last provider whom did, Halifax, ceased the scheme last July.

However, Builder deposits are still accepted (5% max), as are family gifted/discounted pch arrangements.

Hope this helps

Holly