Purchasing a house at discount from parents/landlord

pinknsparkly

Afternoon everyone.

My partner and I currently live in house that my parents purchased for us to live in just over a year ago. We rent the property off them (or more accurately, he rents it off them as I'm a student - he's the one listed as the tenant on all the documentation, not me). The intention is that my partner and I purchase the house from them at the price they paid for it a year ago, once I finish my studies and am back in full-time employment. According to the Zoopla estimates, the property value has increased by £13k in that time. We have a deposit that at the moment is about 9% of the purchase price (once we've taken out the money needed for stamp duty and other house purchasing costs), and are stil saving so would have a larger deposit by the time we came to buy in about 9 months or so.

My question is, is the LTV calculated on the PURCHASE price or the MARKET VALUE of the property. Because the V in LTV suggests it should be the market value..... And for us, that would change which category of LTV we would fall in (it would move us from being 90% LTV to 85% LTV) and so would decrease our interest rates.

Using some nice round numbers for an example:
- our deposit = £25k
- purchase price of property = £275k
- market value of property = £288k
- required mortgage = £250k (£275k purchase price - £25k deposit)

LTV on purchase price = 250/275 = 91%
LTV on market value = 250/288 = 87%

Would any lenders consider/allow us to borrow on the market value instead of the purchase price?

I've seen a couple of different options, one is a "gifted deposit" where my parents could gift me the £13k, but from what I've read this won't work because the lenders require the gifted deposit to be a minimum of 10% of the property value.... The second option is a tenant discount, whereby the landlord sells the property to the sitting tenant at a discount, for a quick sale so that way my parents would be offering the discount to my partner.

Has anyone used either of these two options? Which lenders did you use? Were they happy about it?

Thanks in advance for any insights you guys can give me!

Typhoon2000

The LTV is based on the lower of the purchase price and mortgage valuation figure.

amnblog

Typhoon2000 wrote: »

The LTV is based on the lower of the purchase price and mortgage valuation figure.

Not the case here. A broker can get you a deal based on the market value.

kingstreet

As amn says, it is possible to have a discount treated as part of your deposit when purchasing as a sitting tenant or from a relative.

Many lender will not see it that way, so a broker is your best source of advice, information and the best deal.

poppy10_2

What about stamp duty

kingstreet

poppy10 wrote: »

What about stamp duty

It's based on the consideration, the actual amount paid.

CGT is based on the market value.

pinknsparkly

Thanks so much everyone. :beer:

Poppy, thanks for asking the question about stamp duty - I'd just assumed it would be based on the purchase price. I'm glad it's possible, now I need to find myself a good mortgage broker!

As I said, we can do it without going down this route (and would be on a 90% LTV mortgage) but it has the potential to save us quite a bit of money if we can get a lower interest rate by being on an 85% LTV instead :j

mrginge

I wouldn't rely on zoopla to give you an accurate valuation tbh.