Vendor selling at a low price but bank want this as a gifted deposit

SMcCalden

Hi.
I'm in the middle of trying to secure a mortgage which is proving very difficult - much more so than it should be - so trying to see here if there's something else I should do to make this easier. Thanks in advance.

We have agreed a purchase price from the vendor roughly 50k lower than the house value but the bank want this difference classed as a gifted deposit. It's really not though - it's 2 parties agreeing a lower selling price for speed, convenience, and well because we know the vendor and they want to do a nice thing for us. Surely the price we agree and the loan we take out to secure the mortgage has really nothing to do with this 50k. She could sell her house to us for £2 if she wanted to - correct?

Any advice please on what I can do to secure this mortgage OR a bank/building society that would be good to do this with as our current bank just seem to be making this uber-complex?

Thanks

davidmcn

They know you and want to do a nice thing for you. So, a bit like a gift then? It's obviously not a genuinely arm's length transaction.

theartfullodger

The bank want you to lie? Don't do business with them, find another lender.

Or did they mean if you want a mortgage for agreed purchase price PLUS the £50k?


Or is there something else going on?

Thrugelmir

SMcCalden wrote: »

She could sell her house to us for £2 if she wanted to - correct?

Nobody gives away assets of value without reason. What's your relationship to the other party. Why the undervalue of the property.

jonboy321

basically the bank want to know a list of your creditors/ who you owe money to should something bad happen. They are asking whether your friend expects you to pay back the £50k.
If you had a £50k loan then this would affect your ability to afford the mortgage, the bank want to make sure you are not overstretching yourself.
The bank need to understand why they are selling at so much under value, is it a problem to get this letter?

kingstreet

What is your deposit?

Where from?

xylophone

The house has been valued for the bank for the purposes of the mortgage loan?

It is obvious that the house is being sold at significant undervalue.

The vendors are therefore making you a gift.

Is the house the vendors' Principal Private Residence?

If not, what about their CGT liability?

As it is a gift, there are possibly IHT implications.

SMcCalden

Thanks all for the replies....

The vendor is my mother. She's happy to sell at a reduced price. She has no desire to have the reduction repaid - a genuine low sale agreed price basically.

We're not making any formal deposit as such. The loan to value (taking into account actual market value of the property means we can get a good mortgage rate at the full "sale agreed" price for the mortgage.

Bank have spoken to me again today and it's like a black box and no tangible reason being given to me as to why this Value -50K mortgage application cannot be accepted.

So, I'm resigned to trying again with another bank so is there one that will do this easily OR is there a specific scenario I need to be laying out for them to help ease the process over here and their understanding of it.

I can't believe it's so difficult for a mortgage to be approved for a genuine sale agreed price which differs from the market value of the property.

theartfullodger

It's obviously nothing to do with the reduction in price intended to bring you under some stamp-duty limit, eh?

Silian

What is the problem with the bank wanting to have it classed as a gifted deposit? It will decrease your LTV.

xylophone

The vendor is my mother. She's happy to sell at a reduced price. She has no desire to have the reduction repaid - a genuine low sale agreed price basically.

It is also a genuine gift....

Is the house your mother's PPR?