mortgage deposit confusion

fortytwo42

Hi, im wondering if anyone can give their opinion on my situation.

My partner needs to sell his house to release equity (cant remortgage) and I have offered to buy the house in order for this to happen. I have have an offer in principle of 93k for a BTL mortgage. The house is valued at 130k.

93k allows mortgage to be paid off and equity released from the sale.

What we have now been told is that in order for the mortgage to be agreed we would have to physically show a deposit of 37k...

We believed that someone could sell their house for whatever price they wanted as the mortgage is offered on the valuation price? We were prepared to show a small deposit of the difference between the mortgage and the 'purchase price' tha we decide, if need be...but we dont have 37k! If we did he wouldnt need to sell the house!

Lawyer (convayancing) seemed to think that the deposit could be 'gifted' between the two of us but broker said that lenders only now allow this between family members or married couples...?

Anyone any experience of this type of situation?

We and the property in question are in Scotland.

Sorry this is in buying houses section of the forum as well.

Thanks.

holly_hobby

There are a couple of issues here....

This is not a family discounted pch price

But is actually a Vendor gifted deposit (as he is not related to you) and they are no longer accepted (Halifax were the last to pull out some time ago).

Further more, are you buying the property from him for your sole occupation, ie he will move out on completion to reside in another property ?

If not (which is my guess), the lender will have real issues with this, due to the fact they can't get vacant possession, which may effectively prevent a succesful future petition for a possession (repossession) order.

If the additional idea was that he would also jointly pay the mge with you, then this further effectively turns the exercise into a "sale and rent" back agreement (his contribution to the mge being akin to rent) - and that is another non-acceptable arrangement from a lenders point of view - and goes back to possessionary issues.

So there are several reasons why this is a complete no go, from top to bottom.

Sorry this post wasn't more positive ....

He can still sell of course to a 3rd party (no gifted depost don't forget) .....

But if a mge is reqd, he can't remain resident (if he sells to another known party), and if selling to you he can't gift you (even by a vendor cashback arrangement - which again is not permitted ), any element of deposit the lender demans for to facilitate the sale and pch.

Hope this helps explains the issues re your current thoughts on how to progress, which I can't imagine wouldn't apply to lenders also active in Scotland (and the possessionary process).

Can I ask why he can't remortgage ? (if you wish to reveal of course) as we may have a solution that you or your broker, haven't yet considered.

Hope this helps

Holly

fortytwo42

Thanks so much for taking the time to respond!

Sorry, should have explained, he doesnt live in the property, it is rented out just now and has been for past few years. This would not need to change and rent covers mortgage payments either way.

Due to previous circumstances he wont be able to remortgage himself at the moment...

holly_hobby

Right so you want to purchase it as a buy to let, and not your own home.

Vendor deposit issue remains unchanged ....

Vacant possession remanis unchanged (but in this case it relates to no sitting tenants on completion)

Won't bother going into min income and other criteria, as the deposit issue on its own, is a deal breaker for what you are proposing.

Leaving the remaining issue of a traditional sale and pch arrangement (completion occuring after current AST has expired and tenants have vacated).

Hope this helps

Holly

Thrugelmir

fortytwo42 wrote: »

We believed that someone could sell their house for whatever price they wanted as the mortgage is offered on the valuation price?

Purchase price if lower.

kingstreet

Yep.

Maximum mortgage is based on purchase price or valuation, whichever is the lower and as hh said, vendor gifted deposit went out the window in July 2011 when Halifax exited the market.

This could have been done as a "purchase at undervalue from family member," but you aren't related.

All I can suggest is you tell us why you think he can't remortgage, because your current plan is dead in the water.

fortytwo42

holly_hobby wrote: »

Vacant possession remanis unchanged (but in this case it relates to no sitting tenants on completion)

So does this mean that if we managed to get the full deposit and go ahead with the sale that we would have to evict the existing tenants then find other ones..??

Let_Us_See

A sitting tenant difficult (if not impossible), an existing tenant with AST (Assured Shorthold Tenancy) agreement not a problem.