Equity as a deposit?

Muffin_Princess

My other half an I are looking at buying a house. The house belongs to his dad who has offered it to us for 55% of its value. We're looking at mortgages and have spoken to a couple of brokers who are looking at some options for us but we're also doing our own research.

I've been looking online and two of the questions are "house value" and "Amount of deposit." Now, we don't actually have much of a cash deposit but we're hoping the 45% of the house that his dad is gifting to us could count instead of a deposit. So, in the box that says "House value" do we put the actual value, or just the amount we want to borrow? And in "Deposit" do we put what we actually have in cash, or do we put the amount that's been gifted to us in equity?

We've called up a couple of banks and one doesn't care about the gifted equity, they still want us to produce a 10% cash deposit on what we want to borrow. Another one says we won't need to make a cash deposit, they will use the house equity instead. So what do we put in the boxes when searching online? Thanks in advance for your answers!

Thrugelmir

Does your other half's Dad reside in the house ?

Muffin_Princess

He does at the moment, but him and his wife will be moving out, they've got another house they're buying.

GMS

You are looking at a purchase at undervalue from a close family member. Essentially a gifted deposit in the form of equity.

Make sure any prospective lender is aware of this at the start to avoid any issues.

Alternatively get a broker to deal with it.

Good luck

Muffin_Princess

Thanks, just wondering what to put in the boxes that ask for our deposit amount when getting quotes online. As I said, a couple of brokers are looking for us, but we also want to do our own research and I just don't know what to put in the boxes. Is it nothing, or is it the value of the gifted equity?

GMS

Value of the gift is your deposit but make sure each particular lender is happy with the transaction.

HappyMJ

Personally, if this were me...I'd get the vendor to give you the money as cash first...Then you have your 25% deposit. Then buy the property with a 75% mortgage then the vendor (the family member) gets their money back.

i.e Let's say you have £1,000...Get the family member to give you £25,000 before the transaction takes place. A non-repayable gift (it must be in writing that it is non-repayable)....Then you buy the property at £100,000 borrowing £75,000. The family member gets £100,000 on the sale and you have your 75% mortgage.

(replace above figures with your own)

Muffin_Princess

That seems a bit confusing, we would just want to use the equity in the house as a deposit instead of cash, which is what we've decided we're going to do. I'm not sure where his dad is meant to get that amount of cash from?

At least one bank has already said they would use the equity as a deposit instead of cash, all I was wondering is what to put in the box asking for "deposit amount" when making enquiries online, if they just mean a cash deposit or if equity can count here, just when filling in that box online.

GMS, thanks for your answer too, that makes sense