Cashback from vendor - legal?

AlexP1980

Hi everyone,

just a quick question please. I have around £20,000 available as a deposit and I have found a house I like, which I think I can pick up for roughly £150,000. The issue is that it needs a little work doing on it.

The house was originally valued at £160,000, I was wondering if I was to offer £155,000 is there any legal way I could agree on this sale price and getting £5,000 back from the vendor (if they agree?). That way I can use the £5k on the bits that need doing on the house. In all honesty agreeing to a lower amount as the purchase price (say £145000) doesnt really help as all that does is reduce my mortgage repayments, I'd rather pay the extra £30 or so a month for the higher purchase price and use the extra £5k on the house.

I've seen things like vendor-gifted/paid deposits before which gave me the idea, just wondered if it was legal or classed as a type of mortgage fraud or if I would be better forgetting the idea quickly!

Thanks!

Generali

You'd end up paying more stamp duty. If the house is only really worth £155,000 you may also have problems borrowing as if the house is worth £160,000.

Finally, what happens if the vendor simply doesn't pay you the £5,000?

rosie383

And work out how much extra interest you will pay on that 'extra bit' over the life of a 25 year mortgage! It may be an extra £30 now, but what happens when interest rates rise? If the house is 'liveable' in its current state, then I'd think you would be better off tightening your belt as much as possible and doing the jobs as and when you can afford them.

Save a bit of extra money on the purchase by sourcing your own surveyor/conveyancer/mortgage broker etc.

betmunch

Vendor gifted deposits are perfectly legal and above board.

The difficulty is finding a lender that will accept it. Its been so long since I was asked I honestly couldnt tell you if there are any still doing it, I suspect not.

Speak to your broker to find out if its doable or not.

Having said that. If youre buying at £150,000 Just put down £15,000 of your £20,000 deposit. That wont change the interest rate and you will still have £5,000 left for the work

AlexP1980

OK thanks everyone, looks like its not the best option. Thanks again, I'll let you know how I get on.

Landofwood

I don't get it. If the vendor is going to give you back £5k, why don't you just pay £150k in the first place?

martinsurrey

Landofwood wrote: »

I don't get it. If the vendor is going to give you back £5k, why don't you just pay £150k in the first place?

10% deposit on £150k = 15k cash spent upfront

10% deposit on £155 - £5k cash back = £10.5k spent upfront. Which is why lenders dont like them and very few accept them

Landofwood

martinsurrey wrote: »

10% deposit on £150k = 15k cash spent upfront

10% deposit on £155 - £5k cash back = £10.5k spent upfront. Which is why lenders dont like them and very few accept them

Got it. Thanks.

kingstreet

Unless this transaction involves a builder, landlord & tenant, or close relatives, no lender currently accepts "vendor gifted deposit" business.

Last lender out was Halifax in July 2012.