Gifted equity deposit

jennyc85

Sea_Shell wrote: »

Do you live with your Dad, or is this a second house he owns?

It's a second house he owns

AnotherJoe

jennyc85 wrote: »

Ok thanks that makes sense now. I thought the equity was calculated on the market value that's why I was getting confused. Yes we're aware the CGT is calculated on market value. So it makes more sense to sell it to a stranger and physically move then as we will have a bigger deposit. The £190k figure came from the remaining mortgage, plus CGT, plus budget for renovation as I thought we could use all the equity in the house as our deposit but I was obviously mistaken.

You could use it as your deposit if you dad gifted it to you but he isn't . £50k of the money he wants (the difference between your £140k mortgage and his £190k requirement) remains tied up in the house. That's no use to him! The only way to give him his £190k is to get a mortgage for £190k, unless you had £50k in cash to add to your £140k mortgage.

itchyfeet123

jennyc85 wrote: »

But we also have the 'gifted equity deposit', which I thought was market value minus outstanding mortgage.. But am obviously getting confused. If we only have the £140k we can borrow then where is the gifted equity deposit?

The *total* equity is the market value minus outstanding deposit (250-138=112k). This is your Dad's equity, not yours. The *gifted* equity is how much your dad will give you by selling for less than market value (250-190=60k). Without the gifted equity, you would be 110k short of being able to buy this house. With it, you are 50k short.

The amount you can borrow is largely based on how much the bank thinks you can repay on your income. This is unrelated to whether your deposit is savings or a gift. If the bank is willing to lend you 140k and your dad is willing to give you 60k, you can buy a 200k house.

jennyc85

itchyfeet123 wrote: »

The *total* equity is the market value minus outstanding deposit (250-138=112k). This is your Dad's equity, not yours. The *gifted* equity is how much your dad will give you by selling for less than market value (250-190=60k). Without the gifted equity, you would be 110k short of being able to buy this house. With it, you are 50k short.

The amount you can borrow is largely based on how much the bank thinks you can repay on your income. This is unrelated to whether your deposit is savings or a gift. If the bank is willing to lend you 140k and your dad is willing to give you 60k, you can buy a 200k house.

That makes sense thanks. What was getting me muddled is that if he sells this place he will be giving us the total equity as our deposit on a new house (minus CGT and expenses). So our budget for a new house is roughly £220k.