Buying a property from Family with gifted deposit

TomasM

Hi

I appreciate any advice or guidance on the below in advance, and would be great if somebody with real expertise could give valid/legal advise rather than guesses on our circumstance.

Me and my girlfriend currently live with my parents who own the flat we all live in.

My parents are looking to move out and sell the flat, while we would like to purchase it off them at fair market value. My parents are happy to gift us a deposit for this flat from the money they will get selling this flat (which i guess is called equity?).

Current flat worth realistic estimate £300k (based on 3/4 agents valuations which were around 320k mark)
Mortgage left around £130k

Me and my girlfriend can get a mortgage of around £280k and parents are happy to gift around £30k as a deposit from the equity and take the rest of the cash with them to purchase something cheaper in the country.

-So my question is first of all, is this possible?
-Who should we use to get this sorted for us, is it a solicitor? can we go to the lender directly without the solicitor?
- Most importantly, i believe lender will determine the current market value of the property. Do they usually under value the property? We would like the market value of the flat to be as high as possible in order for my parents to have as much money left as possible after purchase providing we can afford it with our mortgage. or for example can they just sell it to us for 310k (30k deposit plus 280k mortgage) as their decision or is it the lender that will determine the sale price of the flat?

Sorry for all of the questions!!

Thank you for any replies.

SmashedAvacado

it should all be possible
you need a lender and a solicitor to act for you in purchasing the property
your parents might want a solicitor to handle the sale, but they could self-conveyance
you will need to disclose the financial details to the lender - they will want a valuation but that value will come from a valuer who will value conservatively but remember lenders are in the business of lending
you will need to pay SDLT
and land registry fees
and legal fees
have you factored those in?

eddddy

What you need is often called a "concessionary purchase mortgage". Here's a couple of examples:

https://www.nationwide-intermediary.co.uk/lendingcriteria/purchase_types/genuine_bargain_price
http://intermediary.tsb.co.uk/criteria/residential-criteria/concessionary-purchase/

i.e. You want to buy at a discount from a family member, and the discount represents your deposit.

You would use a mortgage advisor to arrange a mortgage, not a solicitor.

The mortgage lender will send a valuer to value the flat. They may (or may not) value it at a much lower price than the estate agent. They look at things like what similar properties have sold for nearby.

SDLT_Geek

There is a lot about the issues here: https://forums.moneysavingexpert.com/discussion/5908810/gifted-equity-deposit-sdlt-1-form See especially post 9.

Try not to get tied up in knots with thinking about a "deposit". Focus throughout on what you are seeking to do: that is to buy a property for less than its market value. That concessionary price is the amount that should go on the contract, the transfer, the land transaction return (for SDLT) and be a price the lender is comfortable with.

TomasM

Hi

Thank you for your replies.

We are not looking to purchase the flat for less than its market value, because in this case my parents will be left with less money. I'd like the value of the flat to be as high as possible so once the sale goes through my parents have more cash left if that makes sense.

Would it not be better to go to the lender directly rather than using mortgage advisor who would charge us?

I have taken account of all additional costs, but i believe i will be exempt from stamp duty as we are first time buyers and its under £300k?

Also from my previous experience in housing industry, a lot of the time lenders valuer would look at properties sold near by which would be very against us because most of the flats sold in our block have been sold a lot cheaper because they either went through probate or had a short lease - which is not stated on websites as only the price is shown but by knowing everyone here i knew exact situation and why those flats have sold for a lot cheaper than what ours is worth... proving that to lender would be extremely difficult i guess..

Thanks

eddddy

TomasM wrote: »

We are not looking to purchase the flat for less than its market value, because in this case my parents will be left with less money. I'd like the value of the flat to be as high as possible so once the sale goes through my parents have more cash left if that makes sense.

I think you've misunderstood.

You say:

TomasM wrote: »

Current flat worth realistic estimate £300k (based on 3/4 agents valuations which were around 320k mark)
Mortgage left around £130k

Me and my girlfriend can get a mortgage of around £280k and parents are happy to gift around £30k as a deposit from the equity and take the rest of the cash with them to purchase something cheaper in the country.

i.e. You're saying:

• A)You want your parents to give you £30k, then you will buy their flat for £320k. So your parents end up with £290k.

But with a concessionary mortgage:

• You buy the flat for £290k. So your parents end up with £290k

i.e. both options end up with the same result.

Doing option B is simpler and clearer. It will cause less confusion if you ask lenders about a "Concessionary Mortgage" or "Family Discount"...

... than if you talk about a "Vendor Gifted Deposit" (option A)

SDLT_Geek

eddddy wrote: »

Doing option B is simpler and clearer. It will cause less confusion if you ask lenders about a "Concessionary Mortgage" or "Family Discount"...

Quite right. Also less SDLT as that would then be based on a purchase price of £290K rather than £320K.

SDLT_Geek

There is now a blog on these issues here: https://www.blakemorgan.co.uk/news-events/blog/bank-mum-and-dad-concessionary-purchases/