Mortgage question

Ezrolith

Hello,

I was hoping someone could help with my dilema, I am hoping to buy my mothers house which is valued at £75,000. She is offering it to me for between £45,000-£50,000. I have applied for a mortgage, and said the asking price from my Mum was £50,000. They recommended I provided a deposit so I am providing a £5,000 (10% deposit). This is proving very difficult to get hold of and it will probably be my mum lending it me which gets very complicated! What I was wondering is, can I change the offer to £45,000 with no deposit and still have my mortgage I've been offered.

One of the terms is they only provide 90% of the properties valuation.

My advisor gives me the feeling it's 90% of the 'asking price' for as the asking price is so low compared to the value is he wrong! Does anybody know?

I would much prefer to pay £45,000 and no deposit if that is acceptable to the bank, than borrow £5,000 of my mother just to be helped out by her to get the deposit in the first place! (I am not sure if this is legal?)

I phoned the bank (Abbey) but they told me to speak to my advisor and they can't help me, and also the lady said "oh it's a FAMILY buy, oh we don't have that you need to get your solicitor to write in!".

I don't even have a solicitor yet :-( Just a mortgage offer, and a rip off 1.5% broker! lol.

Thank you for reading this

homer_j_3

If your adviser had advised you to buy it at full market price with your mother gifting you a deposit of whatever the difference is between that and the amount she wants, you could have done it without having to find any deposit of your own.

Lenders will usually always go for the lower of valuation or purchase price.

The fact you are paying 1.5% for a broker just backs up my thoughts that paying for advice doesn't always mean you get better advice!

herbiesjp

Agree with homer

The difference between the market value and the reduced sale price is in effect your deposit

So you do not need to find a deposit

It does not sound like you are getting much for you 1.5%!

Ezrolith

Thanks for your replies guys, but I am still confused!

If the seller wants £45,000, house valued at £75,000 can I get an outright mortgage for £45,000 or would this be a '100% mortgage'.

The reason I am thinking of buying for £50,000 is this means I only want '90%' and the advisor implied this is the only way I would get a mortgage with my history.

You say the lender takes into consideration the valuation or asking price, whichever is lower? So they would not consider lending me the full amount £45,000 if I didn't have a 'deposit'. I guess this is confusing cause it's a family buy or whatever but the bank don't know anything it seems :-|

herbiesjp

The seller can sell for whatever price they want - they have to be aware of potential tax implications of doing so though

YOu do not need any extra deposit, so you can buy at £45k if you want. The difference of £30k is in effect your deposit gifted to you from the vendor.

YOu will be able to get a mortgage for the £45k

It sounds like you need to talk to a whole of market adviser who has dealt with these transactions before, as it appears that who you are talking to is confusing you and making it more complicated than it is

HTH

Ezrolith

Thanks alot for both of your replies so far. You're last comment helped me make sense of the situation and I think you're right. My current M.A. is quite young and seems quite inexperienced in my opinion, especially with the slightly unique situation. You mentioned tax implications of selling the house below market value. I didn't realise there were any implications of this isn't she free to give me the house for a reduced price/free without any penalisation?

It is really difficult to find anyone who knows anything about this L That’s why I came here I’m not good at explaining the situation on the phone etc.

herbiesjp

One potential tax implication may be inheritance tax - however without knowing the perons's situation I cannot say if that is a risk or not, but it should be something they take relevant advice on.

Over-the-phone advice is fine as well, just as long as the person you are talking to can explain clearly the situation, something which your current adviser does not appear to have done

homer_j_3

Herbie seems to have covered things off nicely for you, let us know how you get on.

Sometimes younger brokers have to start out in the realm of charging fees due to them usually being self employed and this example is something I think is worth noting for any budding mortgage adviser - its not all about the exam!

Just developing your post a little further, what discussions have you had on protecting the mortgage?

Ezrolith

As a term of my advisor, if I take out the policies he suggests through his organisation I do not pay the 1.5% fee. (He would get £650 from me but apparently according to the sheet I have these provide him with £1000+ commission... :-|).

These are what he has suggested:
House insurance (obviously) which works out at £50 a month, but I can get a valuation for the same thing on their own website for like £40 and most people I know pay £20-£30 :-S

And 2 policies for each myself and my partner.
'Decreasing term life insurance?' I think it is called, and another decreasing term one.

One pays the mortgage off if either us die, one pays the repayment if we can't work due to illness for more than 6 months.

The total for these 4 come to a further £30. Altogether the policies come to £80 a month, which I can afford due to house being cheap and the mortgage is good, however I might just break the contract on them and insure myself elsewhere for like £30 a month and pay his £700 fee as it says on the terms if I leave his insurance within 4 years I gotta pay the fee anyway (something he didn't mention).

I asked 'if we move in 2 years can we cancel the policies' and he said Yea. Just not if we found a better deal. His example "oh i've found insurance 10p cheaper at morrisons' we all laughed and I said that sounded reasonable.

Didn't realise how much they were charging :-P

My friend found sainsburys life insurance for £5 for £50,000 cover. Where as my policy is £45,000 decreasing but still £7 or something silly!

Ezrolith

I plan on making an appointment with a new mortage advisor and seeing if I can sort things out cheaper because it's a nightmare with this for me. I will talk to him and see what happens.

I phoned the chaps Martin recommends but the guy I spoke to said since I got my offer (May) interest rates have increased .5% and I had a great deal, he suggested I stuck with it. I clearly didn't emphasis I was very unhappy with my current advisor and wasn't bothered about paying slightly more (imagine the insurance saving!).

I am just worried if I start again a.) maybe I will have to wait for my searches to drop off my credit file (tho everyone thinks this wont matter but I have alot now since I applied for mortgage). and b.) I might have to pay a valuation fee on the mortgage I've applied for (was free as part of the deal and I never was told I'd have to pay for it though).

homer_j_3

I would first of all say that there should be no reason to pay anything for the advice you have been given but if they are self employed, they have to earn a living.

I would be very intrigued to read the terms of business and idd you were provided as it sounds like they are getting you whichever way you turn. I would be very cautious before committing to anything! Would you mind naming the organisation that has visited you as I would like to see if their website has their charging structure on.

With regards to the insurances, I still find it so difficult to get my head around how companies can get away with getting customers to sign documents to be responsible for commission clawbacks like this as it is extremely unfair.

Whilst I understand that the reason they do this is because the life company claws back the commission they have paid if it doesn't "stick" for an agreed time but its not treating customers fairly in my eyes - especially if the customer has no further requirement for the cover or is struggling with mortgage repayments and can find equal cover for less elsewhere.

There are generally 4 areas that you need to consider when protecting a mortgage and you are looking at 2 of these.

If you need some life cover for purely protecting the other person from the mortgage debt, it may be cheaper just to do a joint policy which pays on the 1st person prematurely deceasing rather than having separate policies so it pays out on each death.

That said there are occassions that this may be beneficial but if you are just doing it to protect the mortgage then it seems a bit pointless to me. Also, there should be no reason why you couldn't protect both your incomes within the same policy either so I am struggling to get my head around why you are taking 4 policies rather than just 1 or 2 at the most. Surely it won't be for more commission?

I would say that if the company are exercising a right for 4 years to claim commission back, why wouldn't they do that if you moved house and didn't use them again?

I would be fairly comfortable in saying that they won't - he is verbally telling you something that he probably does not have the authority to say and because of this will not put in writing. Just try and see past the happy man that is getting some commission from you to the man 2 years down the line - you move house and go direct or use another adviser. He gets a bill for a clawback and has missed more commission from you because you didn't use him again - will he still be the cheery man you are dealing with? I think that document that you signed might be seeing daylight again.

I would just say that cheapest isn't always best where life cover comes involved because they are not all the same and it could be a false economy. I would maybe try and get a 2nd opinion on this as often the supermaket insures wont give you the option to protect your income.

This to me has been a typical fee charging adviser who has done everything that I expected other than ask you to pay for your income protection in 1 lump sum for 5 years worth of cover and add it to your mortgage.

Apologies to those fee charging advisers that do not operate in this manner!