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

davidmcn

SMcCalden wrote: »

we know the vendor

Slight understatement there!

SMcCalden wrote: »

The vendor is my mother

Thrugelmir

SMcCalden wrote: »

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.

Where's your mother intending to live post the sale?

Is the transaction intended to avoid IHT or care fees?

lisyloo

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

Unless it's to



evade tax e.g. stamp duty
evade inheritance tax illegally
deliberate deprivation of assets when she may later need means tested care

kingstreet

This is concessionary purchase from a relative, the price reduction is "gifted equity" being used as your deposit.

If the price is simply reduced and you attempt to borrow all of that, you want a 100% mortgage and no-one is offering them.

It sounds like the lender is right and you don't understand how such sales work. Direct to lender, or via a broker?

jonboy321

The bank sees it as you indirectly making a cash deposit - they need to know your mother is not going to claim this back.
As others have said, they will also be looking to confirm that this is not a tax avoidance measure and there be a later claim (for care home fees, IHT etc) that you would be obliged to pay

SMcCalden

Ok....

-it is her main home but lives now with her partner. Avoidance of inheritance / care fees etc not the plan at all.
-I will still be paying stamp duty regardless of the gift so not avoidance here.
-gifted equity sounds actually more realistic as the more I read ‘gifted deposit’ is where someone else is giving you cash for you to use as the deposit on a 3rd property. I’ll explore that actually.

kingstreet

Stamp duty is payable on the consideration, the actual amount transferred, not the market value. However, if she is liable for capital gains tax, this will be based on the market value.

theartfullodger

SMcCalden wrote: »

Ok....

-it is her main home but lives now with her partner. ..................

Sorry, I'm confused (70yrs old...) Is it....

- You are buying a property that was and still is her main home, where she lives with her partner.... or....

- You are buying a property that was her main home, but she now lives with her partner in his place.

One way or another you are getting a £50k gifted deposit: Makes sense now.

SMcCalden

2nd option there. She lives in another property completely with her partner.

davidmcn

SMcCalden wrote: »

2nd option there. She lives in another property completely with her partner.

In which case, she can't also claim this one is her main home for the purposes of CGT etc.