What is the issue with gifted deposits....

Valli

was only a suggestion as to how things might appear to lenders! bear in mind please gifted deposits *might* be given to adult children who have lived in the parental home, and not paid a market rate for the privelege! I was merely suggesting a general case not a specific one.
Certainly if a person is renting a property then finding the wherewithal to rent AND save huge deposit would be really difficult.
BUT I would hope (and I don't work in this sector at all) that if a lender was evaluating the soundness of a potential homebuyrer then looking at a person who has been paying rent+bills in a postive light would be totally sensible because the renter would have a TRUE idea of his/her/their living expenses.

vectistim

I believe another issue with gifted deposits is with bankruptcy. Say the gifter givers away £50,000 one day and declares bankruptcy the next day . . .

TrickyDicky101

How does your mother propose to release equity from her current property?

princeofpounds

There is more than one type of gifted deposit, and I suspect you are confusing the reactions to the various types.

The sort of gifted deposit that is a real problem is when the vendor (or agent or other intermediary connected with the sale) sell a house for a given price and then gives some back as a rebate.

This is just a price cut 'hiding' as a deposit. It is wrong for various reasons. The first is that the land registry, which is meant to record market transactions, would end up recording an artificially boosted price (as the buyer was never actually prepared to pay the headline price). This practice has now been stopped, in theory at least, but it was very common up to a couple of years ago, particularly for developers who wanted to support the perceived value of the remaining units.

But the banks also care about this issue. Because if they lend money on this inflated price, should the new owner then default the bank would find out they would never be able to sell the house at the price they thought they would. This means that they have an increased chance of making a loss (and even small extra losses hurt a bank's profit badly)

Deposits gifted by relatives are not such an issue. But banks can still be a little bit careful about them. This is for a number of reasons:

- As pointed out, it is not such a strong indication of the buyer's true financial abilities. You talk about a record of paying rent and saving but you aren't saving enough for a deposit if you need a gift, and frankly banks aren't going to waste time listening to every detail of your finances if they don't want to. It costs money.
- Also, the bank needs to be concerned about the risk that this is not really a gift but a loan or second 'owner'. This can lead to unexpected claims on the title of the house, or a primary owner who might try to service a family debt above their mortgage.

Finally, from the way you speak about being able to afford X, Y and Z, I would just underline that with interest rates at record lows what you can afford now might not have any connection to what you can afford should rates change.

dave76

currently in the process of moving and a bit short on the deposit for the new place, Nationwide asked for proof of deposit by way of bank statement showing the funds. When we said the funds were not yet in place as it will be gifted by a family member they just asked that that person wrote a letter to the Nationwide stating they were gifting x amount and there were no conditions attached and they would have no interest in the property.

Tania85

Hi all, I need some advice with regards to a misfortune that happened to me and my husband. About 2 months ago we went to view a Taylor Wimpey development in Bathgate, Edinburgh. We really liked the show home a 4 bedroom house. So we decided to see if they had a similar house to sell. We sat down with the sales person to discuss price and options. The initial price which by the way is not posted on the website just on a price list in the sales office, was 228k. The house was due to be finished end of December so they were keen to get a buyer as soon as possible. The sales lady said she could get the price down to 202k, which we thought it was great. We then discussed with the sales lady that we could get from the bank a mortgage of no more than 150,000 and our deposit was just 40k so we were short about 10-12k. She then said that they could do a 5% builders deposit which applied to the sales price of 202k would be the difference we were missing. Based on this information my husband and I put the reservation fee of £500 to secure the house feeling happy we made a great deal.
We managed to obtain the mortgage and the solicitors started the sales process. With two weeks till the date of entry in the house, we get a letter from the solicitor detailing wether amount due by us, with no mention of the 5% builder's deposit so we found ourselves in a position where we just don't have the extra 10k which we were told is going to be covered as a builders deposit.
We have confronted the sales lady which has no recollection of the discussion before we decided to sign the reservation agreement.

We are now in a position where we paid 500 reservation fee, £3,200 to the solicitors for their fees, dues and stamp duty, paid for carpets and ordered furniture. We need now to get out of the deal and we will loose a lot of money, money for which like other people we spent saving for the last 7-8 years working really hard, no help from family or friends.....
We are thinking of submitting complaints to Taylor Wimpey and the Consumer Code and even to the FSA for missi-selling and misleading.
Please anyone if you can help with any advice or ideas that would be great, we are ally heartbroken and we have been loosing sleep for the past couple of nights.

Thank you

terrencetrentderby

I dont think a lender will care if the gift comes from family; after all their money is as good as anyones. Gifts from vendors on the other hand are basically a way of manipulating values and can be used to help the buyer secure a mortgage from a lender. Lenders dont want values manipulated as it gets around their safeguards around LTVs which are there to stop the mortgage book of the lender being at risk of going into negative equity.

kingstreet

Tania85 wrote: »

Hi all, I need some advice with regards to a misfortune that happened to me and my husband. About 2 months ago we went to view a Taylor Wimpey development in Bathgate, Edinburgh. We really liked the show home a 4 bedroom house. So we decided to see if they had a similar house to sell. We sat down with the sales person to discuss price and options. The initial price which by the way is not posted on the website just on a price list in the sales office, was 228k. The house was due to be finished end of December so they were keen to get a buyer as soon as possible. The sales lady said she could get the price down to 202k, which we thought it was great. We then discussed with the sales lady that we could get from the bank a mortgage of no more than 150,000 and our deposit was just 40k so we were short about 10-12k. She then said that they could do a 5% builders deposit which applied to the sales price of 202k would be the difference we were missing. Based on this information my husband and I put the reservation fee of £500 to secure the house feeling happy we made a great deal.
We managed to obtain the mortgage and the solicitors started the sales process. With two weeks till the date of entry in the house, we get a letter from the solicitor detailing wether amount due by us, with no mention of the 5% builder's deposit so we found ourselves in a position where we just don't have the extra 10k which we were told is going to be covered as a builders deposit.
We have confronted the sales lady which has no recollection of the discussion before we decided to sign the reservation agreement.

We are now in a position where we paid 500 reservation fee, £3,200 to the solicitors for their fees, dues and stamp duty, paid for carpets and ordered furniture. We need now to get out of the deal and we will loose a lot of money, money for which like other people we spent saving for the last 7-8 years working really hard, no help from family or friends.....
We are thinking of submitting complaints to Taylor Wimpey and the Consumer Code and even to the FSA for missi-selling and misleading.
Please anyone if you can help with any advice or ideas that would be great, we are ally heartbroken and we have been loosing sleep for the past couple of nights.

Thank you

FSA? Consumer Code?

The FSA has nothing to do with house sales, so they won't be able to help. I don't know what the Consumer Code is...

What did your actual reservation form say? The price and any other incentives should have been set out on there and confirmed in writing.

You should address a written complaint to the MD of the builder in question.

The reservation fee you paid is refundable and stamp duty is not payable until completion. You have spent some of the solicitor's fees, probably a valuation fee for the mortgage and the search fees but the bulk of the money you mention should be refunded to you. The rest you should chase via the developer complaint.

You should have started a new thread about this, rather than bump an old thread on a totally different subject.