Is a deposit really needed?

khampson

I have the chance to buy a property from my grandparents who are moving into a bungalow, I have been offered it at a reduced price bit will a mortgage company still require a deposit? So say for instance if the house is worth £90000 but I only need a mortgage for £75000 will they still require a deposit even though the house is valued at £15000 more than the mortgage?

Thank you

DomRavioli

If it is valued at more than the mortgage needed, you are being gifted a deposit through reduction.

Please, please speak to a mortgage provider - each have their own criteria for this.

csgohan4

Are you sure you are ready to own a house? You don't even have reserve for a deposit on a house. Boiler breaks and that's 2-3 k down

khampson

csgohan4 wrote: »

Are you sure you are ready to own a house? You don't even have reserve for a deposit on a house. Boiler breaks and that's 2-3 k down

Just to help you out, at no point did I say I don't have a deposit, I already own a house and a new boiler in a 3 bedroom semi is £1400 fitted because I had it fitted in January

AnotherJoe

If it's going to be a BTL then you will be very unlikely to get it since you'd need to have at least 25% deposit (of which the £15k even if accepted as a gifted deposit wouldn't be that high) plus the rent liked wouldn't cover 125% of the mortgage.
If it's not BTL, please explain the whole picture in one post instead of eking it out.

HappyMJ

It's much easier if you can provide a deposit from your savings. The vendor can after completion give you the money back.

You could buy it at market value £90,000 with a 80% mortgage putting down £18,000 and borrowing £72,000 and once the sale is complete your grandparents can give you the £18,000 back.

It will also set the value for CGT at £90,000. You could buy it at £72,000 but when you sell you'll be paying CGT on the price you get for it including the difference between £72,000 and £90,000. At a CGT rate of 28% that could cost you an extra £5,000 in tax.

khampson

AnotherJoe wrote: »

If it's going to be a BTL then you will be very unlikely to get it since you'd need to have at least 25% deposit (of which the £15k even if accepted as a gifted deposit wouldn't be that high) plus the rent liked wouldn't cover 125% of the mortgage.
If it's not BTL, please explain the whole picture in one post instead of eking it out.

Thank you for your reply, I currently have my own property valued at £90,000 my current mortgage on that property is £63,000. I can buy their property at a reduced rate when they decide to move, and either sell my property or rent it out, I am undecided what I am going to do so I can get a idea, my current the mortgage is £316 and rents in my area are generally between £450 and £500. Thanks

khampson

I can either sell or rent out my current property

Alter_ego

If you rent it, buying a second property will cost you the extra 3% stamp duty.

AnotherJoe

Whichever you do,factor in the extra 3% SDLT when you buy. You can get that back if you sell your property within 3 years.
I don't think you will get a mortgage unless your grandparents sold it to you at a more reduced cost.
You should also read up about being a landlord. It's not the easy ride to riches many think it is,there are a lot of legal responsibilities, a lot of costs, and it's a big risk. one bad tenant could wipe out years of profit.
If you are just looking to get the extra money your grandparents are in effect giving you they could just sell the house at full price and give you the difference.
If you want to get into being a landlord, do more research and find a broker who will help you get a BTL mortgage. On these figures it would be close.

khampson

AnotherJoe wrote: »

Whichever you do,factor in the extra 3% SDLT when you buy. You can get that back if you sell your property within 3 years.
I don't think you will get a mortgage unless your grandparents sold it to you at a more reduced cost.
You should also read up about being a landlord. It's not the easy ride to riches many think it is,there are a lot of legal responsibilities, a lot of costs, and it's a big risk. one bad tenant could wipe out years of profit.
If you are just looking to get the extra money your grandparents are in effect giving you they could just sell the house at full price and give you the difference.
If you want to get into being a landlord, do more research and find a broker who will help you get a BTL mortgage. On these figures it would be close.

Can you just outline the pros and cons into paying full price and them giving me the difference on the property or accepting it at a lower price to buy it from the start?