FTB - Buying from Granparent at Full Market Value

totalwipeout2002

Hello Folks,

I'm looking for some advice in relation to buying a house from family; specifically my Grandparent, at full market value.

I understand that the fact that we are purchasing the house at FMV means that we are less likely to run into complications that would arise from a purchase at less than market value.

There are two pieces of advice I'm ideally after -

1) My granparent is gifting us a 10% deposit for the mortgage - that will come from he sale of the house. Do lenders generally penalise for gifted deposits and will it effect the interest rates we are likely to recieve? I ask this as the cash is available upfront if it makes for a brokering a better deal.

2) What steps are required; I've a meeting later this week with a mortgage advisor but not sure of what fee's they would expect for brokering us a deal and if there is really any need for them in this type of sale? I understand that all we would really need to do is approach a solicitor to broker the legal sale of the home? Based on a Lenders valuation of the property.

Ideally we want to minimise the ascociated fee's as we may need to pay a higher product fee for better interest rate on a fixed term deal (certainly from what I'm seeing on lenders websites).

Really appreciate a steer in relation to the above points - or more generally anything that I might not have covered which you think is relevant.

Thanks,

Chris

bitsandpieces

totalwipeout2002 wrote: »

1) My granparent is gifting us a 10% deposit for the mortgage - that will come from he sale of the house. Do lenders generally penalise for gifted deposits and will it effect the interest rates we are likely to recieve? I ask this as the cash is available upfront if it makes for a brokering a better deal.

Lenders don't tend to 'count' vendor gifted deposits for non-newbuild properties nowadays. So you would likely get a mortgage based on the deposit you have saved yourself - e.g. on a £100k property where you have saved £10k deposit and the vendor gives you £10k you could only get a 90% mortgage. A mortgage broker will know what is on offer nowadays, though. It might also be worth considering your grandparent just knocking £10k off the price, too - would that leave you better off?

totalwipeout2002

bitsandpieces wrote: »

Lenders don't tend to 'count' vendor gifted deposits for non-newbuild properties nowadays. So you would likely get a mortgage based on the deposit you have saved yourself - e.g. on a £100k property where you have saved £10k deposit and the vendor gives you £10k you could only get a 90% mortgage. A mortgage broker will know what is on offer nowadays, though. It might also be worth considering your grandparent just knocking £10k off the price, too - would that leave you better off?

Thanks very much for the advice! I think the concern we had about knocking 10k off the price is that we would be liable to capital gains or inheritence taxes as the house is being sold at less than market value. I didn't realise that vendors are less likely to lend on a gifted deposit basis when its non-new build so thats very handy to know.

Mojisola

totalwipeout2002 wrote: »

Thanks very much for the advice! I think the concern we had about knocking 10k off the price is that we would be liable to capital gains or inheritence taxes as the house is being sold at less than market value.

There won't be any capital gains tax to worry about if it's going to be your home.

If your grandparent is giving you £10k, he/she has given you £10k - either as a reduced price or a gifted deposit - and IHT could come into play.

kingstreet

There are lenders who will accept a 10% reduction in the price as your deposit. It's known as a purchase at undervalue from a family member.

Otherwise, you would need the 10% in cash in preparation for exchange.

martinsurrey

bitsandpieces wrote: »

Lenders don't tend to 'count' vendor gifted deposits for non-newbuild properties nowadays. So you would likely get a mortgage based on the deposit you have saved yourself - e.g. on a £100k property where you have saved £10k deposit and the vendor gives you £10k you could only get a 90% mortgage. A mortgage broker will know what is on offer nowadays, though. It might also be worth considering your grandparent just knocking £10k off the price, too - would that leave you better off?

This is really only true of open market gifted deposits.

Gifts from family members are normal and common, but be upfront to everyone about the situation.

(FYI, think about it like this, the grandparents (“GP”) could get a loan against the property, give the cash to the OP, who uses this as a gifted cash deposit to buy the house, which is fine for most lenders. The GP’s use this cash to repay the loan.)

Exactly the result the OP wants, but with a none cash transfer it’s a lot cleaner and a lot less fees.

I would also recommend the OP uses a good LOCAL solicitor, not the cheapest, since it’s not a normal situation, sitting in a room with them will save a lot of headaches.

bitsandpieces

martinsurrey wrote: »

This is really only true of open market gifted deposits.

Gifts from family members are normal and common, but be upfront to everyone about the situation.

I thought lenders had got sniffy about gifts from family members when you're buying off them, too? A mortgage advisor will have a clearer idea, though, and I might well be wrong!

As has been said, CGT isn't an issue if it's your home. There may be a chance that - when you come to resell - if you buy at a below market price some buyers expect to get it at a lower price. No good reason why they should, but people can be strange like that.

kingstreet

Vendor gifted deposit business is now only accepted where the vendor is a family member, or a builder.

totalwipeout2002

Folks, thoroughly appreciate all the advice and discussions . I should perhaps have been more clear on the desposit though - although the gifted cash will ultimately come from the cash generated by the sale of the house. My GP has the cash in savings and is happy to give me it now if its more simplistic to broker a normal arrangement? I guess in that case, and with the advice given so far, we're keen to understand if brokering a normal mortgage (i.e. 10% Deposit in cash upfront) will incur less hassle/costs than arranging a gifted deposit type deal?

Also, does anyone have any view on using a mortgage advior for this type of thing? Over and above the solicitor? Are they necessary for a newbie to the market - in perhaps protecting you from hidden costs etc?

Thanks once more,

Chris