New House Buying Question

JohnMurphy_2

Hi,

I have seen a new house that I want to buy and it's up for a very good price.

In order to 'save' my 5% deposit I am thinking of asking the house builder to add an additional 5% onto the price and then give it back to me as a deposit paid deal, this means that I can hang onto my cash.

Even with the 5% increase the house is worth it so the bank will value it at the inflated selling price.

I was just wondering if A) it's legal and anyone's ever done it before?

Thanks

John

dolce_vita

Are you having a laugh?

JohnMurphy_2

dolce_vita wrote: »

Are you having a laugh?

No, serious question.

dolce_vita

Have you not wondered why on earth the builder is willing to sell you a house at 5% below market value in the first place?

JohnMurphy_2

dolce_vita wrote: »

Have you not wondered why on earth the builder is willing to sell you a house at 5% below market value in the first place?

Dolce Vita,

It's a deal that I had already discussed with the builder, I'm just thinking about changing the financial profile of the deal to enable me to hang on to the deposit (which is over £20K) as I want to do other things with it, nothing more sinister than that really.

dolce_vita

I see.
So the builder is doing you a favour.

Go for it mate. I just hope whatever you do with the 20k works out better than this deal.

best wishes.

JohnMurphy_2

dolce_vita wrote: »

I see.
So the builder is doing you a favour.

Go for it mate. I just hope whatever you do with the 20k works out better than this deal.

best wishes.

Dolce Vita,

Thanks for the best wishes.

I know it's a strange question it's just that right now £20k in my pocket would be more useful (I want to expand my business into a new area) rather than having a mortgage that's £20k less.

John

banditbarron

20k over the period of your mortgage term will equate to a lot of money though

Richard_Webster

This is on the edge of mortgage fraud. I hope you don't tell your solicitor what you are proposing. He will then either have to disinstruct himself or tell the lender about it. If as is usually the case, your solicitor will be acting both for you and the lender, he will have a conflict of tinterest, because the lender would want to know that the price had been deliberately inflated.

Even if you don't tell the solicitor that you have invited the builder deliberately to inflate the value of the property, then your lender still has to value the property for the inflated price (and in the present market it might not do so) and even if it does, in most cases your solicitor will still have a duty either to cease to act or tell the lender about the "deposit paid" deal. Lenders often do accept these, but you can never be sure they will.

silvercar

A mortgage broker would know which lenders would accept gifted deposits and which would not. It has become the norm by some larger developers, so there is little harm in asking if it is possible. To a large extent it will depend on the property value.

A quirk of the system is that new mortgages are based on the price paid for a property whereas remortgages are based on valuations. You could exploit this by buying on a bridging loan and then immediately remortgaging. Not for the faint-hearted and you would have to be (a) in real need of keeping the 20k in your pocket and (b) convinced the valuation will be high enough. Some lenders will not do a remortgage on a property you have owned for less than 6 months others are happy to remortgage from day 2. Again a broker could advise on an individual lenders policy.

terrierlady

the largest gifted deposit we get away with is the 5% deposit paid other wise the valuer takes the deposit off the price of the plot.and the property ends up down valued.