Buying less than the market value - Advice please

GazNicki

Hi all.

We rent a house currently and the owners are open to selling the house. We've had a quick estimate on the house and been told what a good offer would be, but also told what the house is ideally worth. I know at this stage that nothing is solid, but its a basis.

My question is, lets say the house is worth £150k, and the owner would sell for £120k, do you still need a deposit for the mortgage if you only took out £120k as the LTV would be about 80%?

glosoli

To put things simply, lenders work from the lower of the purchase price or the valuation, in this case £120,000, which is what the loan to value would be based on. You would therefore require a percentage of the £120,000 as a deposit.

However, there is what is called "transaction under value", although this is normally limited to a family member who sells to another family member, and the "discount" they receive can be used as a "deposit". That being said, I have read from others on here that there may be a lender or two who do accept transaction under value / gifted deposit applications where the applicant is not buying from a family member, however I am not sure what lenders these are and what other criteria may be applicable.

davidmcn

I think a lender would need some persuading as to why a landlord (even a "nice" one) would give you a 20% discount.

ACG

Chances are lenders would need some deposit but I can think of 1 or 2 who would accept equity from a landlord, I'm just not sure if they would need you to put something in also.

You are less likely to renege on a contract if you have financially contributed to it.