buying house significantly under value, do we need a deposit?

Mortgage_Mark_2

kingstreet wrote: »

The mortgage, deposit and stamp duty are unrelated issues.

The consideration is whatever money actually changes hands. That determines the stamp duty.

What a lender will allow as deposit is a different matter.

Sorry if we're at cross-purposes.

Correct.

Well, that helped!

Thrugelmir

kingstreet wrote: »

The consideration is whatever money actually changes hands. That determines the stamp duty.

If only.........

Stamp duty land tax: transfers of rights

Who is likely to be affected?
Persons who acquire land in the UK under arrangements involving a transfer of rights.

General description of the measure
The stamp duty land tax (SDLT) rules for transfers of rights are being reformed to minimise arguments that they can be used for SDLT avoidance.

Policy objective
The transfer of rights rules have frequently featured in attempted avoidance of SDLT. The objective of the proposed reform is to make the rules more clearly robust against attempted
avoidance while retaining the commercial benefits of the rules. This measure is part of the wider Government programme for tackling SDLT avoidance and making the tax system fairer.

Background to the measure
This measure was announced at Budget 2012. A consultation document was published on 17 July and the formal consultation period closed on 9 October. A consultation response document was published on 11 December 2012 alongside draft legislation.

Detailed proposal
Operative date
The new rules will apply to transactions with an effective date on or after Royal Assent to Finance Bill 2013.

However anti-avoidance measures will include a minimum
consideration rule for transactions where the transferor and transferee are connected or act on non-arm’s length terms, to ensure the full price paid to the vendor is charged to SDLT.

glassrainbow

Parents, as they want to sell but to us and we can't afford the full value. The deposit thing just struck me

Mummy_Bean

I hope you can as were in the process of buying my late grandmothers house for £250k when it worth in the region of £300k.

We do have enough for a deposit but the house in an awful state and will need a lot money invested in it so hoping to keep as much back as possible.

Hoping my mortgage broker will get back to me today with answers.

Mortgage_Mark_2

Mummy_Bean wrote: »

I hope you can as were in the process of buying my late grandmothers house for £250k when it worth in the region of £300k.

We do have enough for a deposit but the house in an awful state and will need a lot money invested in it so hoping to keep as much back as possible.

Hoping my mortgage broker will get back to me today with answers.

If you're buying for £250k then your deposit etc will be based on that. So if you're intending to put down 10% then you need to put down £25k and get a mortgage for £225k for example, rather than being able to say "It's worth £300k so our 'deposit' is £50k, and we'll take the mortgage for £250k".

glassrainbow

Ah that's useful. Annoying but useful.

Dave_Ham

Mortgage_Mark wrote: »

If you're buying for £250k then your deposit etc will be based on that. So if you're intending to put down 10% then you need to put down £25k and get a mortgage for £225k for example, rather than being able to say "It's worth £300k so our 'deposit' is £50k, and we'll take the mortgage for £250k".

Mark I am not sure if you fully understand this, or have just worded it badly.

If the OP (or other poster) declares a purchase price of £300k and physically wants to use the family gifted equity of £50k to just have a mortgage for £250k then they can. They do not need to put in their own funds and they can use the loan to value including the gifted equity deposit.

It is then this consideration price (£250k) they would pay stamp duty on.

Not all lenders will accept this though and many do not like the family gifted equity deposit alone as source of deposit.

Hope this clears it all up

Mortgage_Mark_2

Dave_Ham wrote: »

Mark I am not sure if you fully understand this, or have just worded it badly.

If the OP (or other poster) declares a purchase price of £300k and physically wants to use the family gifted equity of £50k to just have a mortgage for £250k then they can. They do not need to put in their own funds and they can use the loan to value including the gifted equity deposit.

It is then this consideration price (£250k) they would pay stamp duty on.

Not all lenders will accept this though and many do not like the family gifted equity deposit alone as source of deposit.

Hope this clears it all up

If buying from an estate how can there be gifted equity? The person who could have gifted it has passed away?

I'm well aware of gifting equity but that clearly cannot be the case here.

EDIT: Not sure I agree with your assessment of SDLT on the balance minus the gifted deposit but that's a whole other conversation.

EDIT2: Just for clarity, my reading of the situation was "I'm buying a house (from whom irrelevant) for £250k but I think it's actually worth £300k, so can I use that extra £50k 'value' as 'deposit'?"...

Dave_Ham

Ok, it is difficult without the detail and ability to talk things through is always easier to translate than written on a forum.

You certainly cannot use perceived equity based upon market value, it must be direct gifted equity from a family member. Depending upon the details, this could potentially be from an Estate, so long as family and implicit instructions.

I am 100% certain on the SDLT part and we have done 3 this month, it is definitely on the consideration price although I cannot attribute logic to this; it just is..

Anyone reading this though, there are no guarantees as no one size fits all and always take formal advice

glassrainbow

Out of interest, what's the problem with using a family gifted deposit??!