Buying parent's house- Advice required

benno1020

Hi there

Me and my girlfriend are currently looking at buying my Dad's house.

He has had it valued at £220,000 and £210,000 by two separate estate agents. He has said he would give me a substantial discount and that I could buy the house off him for £190,000

We currently have around £15,000 savings which is around 8% deposit- still not enough to buy it with a sales price of £190,000.
However, we would like to try and use the "equity" he is effectively gifting us as part of the mortgage deposit.

Ideally we would like to have a 15% deposit to get access to a better rate and so we could for example try and put it through as follows:

Sales price- £210,000
Gifted equity/deposit = £20,000
Cash deposit= £15,000

LTV = 83.3% which gives us access to the 85% LTV products.

I have spoken to many people about this- some are saying it should be possible, others say it will more than likely be the mortgage company will base LTV on the lower price.

Please advise as its starting to drive me crazy!

Many thanks

Dave_Ham

You can take this as fact. Most banks will base it on the actual worth so long as you get the situation across.

This will sold with the equity essentially gifted from parents.

Obviously the house needs to be worth the higher amount and subject to valuation..

Get a decent broker or put the situation across perfectly in a branch..

All the best

Simon_gloster

Benno,

To confirm Dave, as long as this is a straight forward gift from a parent and nothing more (not business related), the lender will view the LTV from what it is worth ie £210,000.

If dad says have it for £190k and the lender still values it at £210K, the loan to value will be based on the £210k. Considered as a family gift . Very common, very legal and very helpful to those that receive this form of family present.

Enjoy your scouring of <85% LTV mortgage deals.

benno1020

Thanks for the advice guys

benno1020

Hi There

just one more question if you don't mind- say we apply as above
Sales price- £210,000
Gifted equity/deposit = £20,000
Cash deposit= £15,000
Mortgage = £175,000

And they then value the house at £200,000... would they just offer us the £175,000 mortgage at the 90% LTV rate? Or could we ask to then only borrow £170,000 to give us the 85% LTV rate (then I would basically be getting £5,000 additional discount off my dad which I am sure I could get him to agree to!)

Thanks

Simon_gloster

You go by the price you agree to buy at or the valuation of the lender, which-ever is the lowest.

PScogs

Hi,

In this instance is the stamp duty calculated on the market value or on the sale price?

Cheers
Paul

Dave_Ham

PScogs wrote: »

Hi,

In this instance is the stamp duty calculated on the market value or on the sale price?

Cheers
Paul

Market Value and Sale Price are the same as the family member is effectively gifting the difference. Therefore Stamp Duty is payable on the higher amount..