Are LVT and 'deposit' the same.

Ard_2

Hello friends, first time poster.

We're going to moving back in with my parents having come back from working abroad. This will be a permanent move, and as such will be looking to own 50% of the house, and pay half the bills too.

We are both first time buyers, having never bought a house before.

As we will only be borrowing 50% of the value of the house (or less since we have some savings) does that mean we already have a 50% deposit and do not have to save any more to get a 'best buy' rate.

This sounds too good to be true, so please excuse my naivety if it is.

Thanks all

benjus

LTV = 100 - Deposit

So in the case of 50% the LTV and Deposit are the same.

mrginge

is this a house that you are all (inc parents) buying together or are you simply moving in to their current home?

anselld

The term deposit is confusingly used in two ways to mean two completely different things ....

(1) the amounth of equity in the property, ie the amount owned rather than borrowed.

(2) the amount you put down at exchange to secure the property, usually 10% of the purchase price.

jjlandlord

There is no really any 'deposit' in relation to mortgages.

You are applying to a loan and wishes to use the property as security.
The lender will therefore assess whether you can afford to pay the loan back based on your income and whether the security is good enough.

What is important is how much you want to borrow (L) against how much your security is worth (V)

Ard_2

Thanks for your quick responses.

Just to be clear: we don't have, at this moment, 50% of the home's value in our bank accounts. But we will only be looking to borrow 50% of the current market value from a mortgage lender.

My parents to own the house outright right now. We aren't looking to all move out together, rather My wife and I will be moving in with my parents at the same address.

As an example...HSBC recently announced a 5 year fixed for 1.99% for 65% LVT. Ignoring all other criteria (for simplicity) can we go for this?

martinsurrey

I forsee problems.

Generally mortgage companies will want all people on the deeds of the house to be on the mortgage, which will mean your parents, which could effect the term of mortgage you can get.

post on the mortgages board, Kingstreet or another of the brokers will give you good advice.

Pixie5740

That might not be as straightforward as you think. Are your parents gifting you 50% of the property as a deposit so that you will be the owner (50% equity and 50% mortgage) or will your parents retain 50%? Who will be on the deeds?

Ard_2

Ahh. I see the problem.

Well the concept is that we are Co-owners, and thus not gift would exist. but yes that would mean retaining them on the deeds.

If my wife and I could prove that we met all affordability criteria without including my parents, would the bank not take that into account?

Cornucopia

BTW, the terminology is LTV, not LVT.

It stands for Loan To Value, i.e. the proportion of the loan amount as a percentage of the property valuation.

I agree with other posters. It sounds like you want your parents to continue to live in the property, and continue to own 50% of the property, whilst you move in, and obtain a mortgage for the other 50%.

I can definitely see this being a problem. A couple of questions to help tease out the relevant detail...

1. Is the property mortgaged at the moment, or do you parents own it outright? (If they own it outright, simply move in and pay them rent, it'll be much, much simpler).

2. If mortgaged, how much is the existing mortgage and is the plan to pay it off connected to your proposed new mortgage in some way?

fairy_lights

Cornucopia wrote: »

1. Is the property mortgaged at the moment, or do you parents own it outright? (If they own it outright, simply move in and pay them rent, it'll be much, much simpler).

I was thinking that, instead of taking out a mortgage why not just pay that money to your parents as rent, and avoid huge amounts of interest?