Can a seller help a buyer with their deposit?

user1977

Francis63 said:

user1977 said:

Francis63 said:

user1977 said:

Francis63 said:

Slithery said:

Francis63 said:

The vendor is simply willing to lose £15k for a quick sale and a sure sale (no chain)

What makes you think that selling to a FTB will be 'quick and sure'?

There are plenty of sellers who wouldn't even consider a FTB unless it was there only option due to how slow and unsure they are as buyers due to never having been through the process before, having unrealistic expectations and panicking about the tiniest things brought up in a survey,

I think if someone is willing to pay your deposit for you (or a large chunk of it) as a FTB you would not want to back out on a whim. It could be your only chance. 
As I say, I was lucky enough to start off on a 100% mortgage, without that where would I be?

And why do you think 100% mortgages aren't available any more?

But this won't be a 100% mortgage

So is there any equity actually being put in by the buyer? If not then it is a 100% mortgage.

Yes, there is. The gift from the vendor. 

Which isn't actually being put in by the buyer then. It's come from the vendor 5 minutes ago.

eddddy

Francis63 said:

Something has to be done. What better idea? Not every vendor will be willing, but if a simple no chain quick sale is desired this would be a kind solution for both parties...and help the housing market stay afloat.

So do you agree that mainstream mortgage lenders don't allow 'vendor gifted deposits' (although there may be one or two expensive sub-prime lenders who do)? Or are you challenging that?


So your question is essentially "Why don't lenders accept vendor gifted deposits?".

There are probably 2 significant reasons...

• The mortgage lender wants you to have some 'skin in the game'.  If you buy a £300k house with a £300k mortgage, you don't have a huge incentive to 'stick with it'. If the value of the house drops, or you get fed-up with paying a mortgage, you might decide to give the keys back to the lender and walk away - because you won't lose anything. (Although your credit history will be shot to pieces.)

• The mortgage lender would prefer to see that you've had the financial management skills to build up some savings. It's reassurance that you'll have the financial management skills to manage a mortgage. Although, your argument about rent sometimes being more than mortgage payments makes sense. (And some lenders allow deposits gifted by family, which contradicts this a bit.) 

Mortgage lenders average out risk. As you say, you had a 100% mortgage and you managed it fine. But I guess there's a significant percentage of people who didn't.

In your example, you say that lenders can get their money back if they repossess - but lenders don't want to have to do that. They prefer to take on business with a lower risk of repossession.

Francis63

MaryNB said:

Gavin83 said:

Even if lenders did accept this I can't see many vendors agreeing. For this to work the house would have to be fairly priced to start with to avoid down valuations. You'd then have to find a vendor who was willing to accept 10% (or whatever figure) less than this fair price to gift it to a FTB. Given most houses at the moment are going for over asking, especially if fairly priced and even more are at least getting asking price it's likely this FTB offer would be low down the list of offers. Therefore you're essentially asking the vendor to gift a large sum of money to a FTB, who is likely to be a complete stranger. This is ignoring my earlier comment that until the house is actually sold most won't have this money free anyway.

Even ignoring the lender issue I think you're grossly overestimating the number of vendors who'd be willing to do this. It would be such a tiny number it wouldn't even be worth implementing the scheme.

I agree. Once they see how much they need for their onward purchase their generosity might fade. Also at the moment demand is so high they'll have so many people bidding they won't need to sell below asking to get a buyer in fast. Many houses in my area are fully booked for viewings before they're even listed online. House prices just keep rising and rising. This might only work for people downsizing (and not doing for the purpose of freeing up some money for themselves) or selling off property they don't live in. 

Demand is high in some areas, not all. 

Some of us (vendors) are altruistic to some degree. I would rather a FTB or a couple of FTBs bought my home and I helped enable that purchase, than sell for slightly more maybe to a developer, landlord or second homer.

Am just looking for a solution. It is a huge problem

If vendors are willing, it would be nice if some lenders could accommodate.

MaryNB

Francis63 said:

Imagine the business a lender could get if they could get their heads round this and offer it. 

I think they'd be inundated!

And the housing market would do well, govt happy with sales as means more stamp duty, equally estate agents happy. FTB's happy. 

Private landlords would be the losers here.

It's a seller's market at the moment. The issue isn't finding buyers, the issue is not enough sellers. Setting up a scheme where sellers contribute to a buyer's deposit is not an incentive for them to sell their houses given the high demand at the moment.

In my area the amount of houses up for sale is less than a third of what it was during the SDLT holiday. Buyers are struggling to get in to view, never mind get an offer accepted. Given many houses are going SSTC in just a couple of weeks at the moment, and the complications with getting a vendor backed mortgage, I don't seem how this speeds up the process. Sellers can be picky with their buyers, favouring buyers with high deposits, or cash buyers. I can't see any incentive for sellers to agree to this scheme in the current market. It will only come down to how generous they are and how much money they have to spare.

Francis63

user1977 said:

Francis63 said:

user1977 said:

Francis63 said:

user1977 said:

Francis63 said:

Slithery said:

Francis63 said:

The vendor is simply willing to lose £15k for a quick sale and a sure sale (no chain)

What makes you think that selling to a FTB will be 'quick and sure'?

There are plenty of sellers who wouldn't even consider a FTB unless it was there only option due to how slow and unsure they are as buyers due to never having been through the process before, having unrealistic expectations and panicking about the tiniest things brought up in a survey,

I think if someone is willing to pay your deposit for you (or a large chunk of it) as a FTB you would not want to back out on a whim. It could be your only chance. 
As I say, I was lucky enough to start off on a 100% mortgage, without that where would I be?

And why do you think 100% mortgages aren't available any more?

But this won't be a 100% mortgage

So is there any equity actually being put in by the buyer? If not then it is a 100% mortgage.

Yes, there is. The gift from the vendor. 

Which isn't actually being put in by the buyer then. It's come from the vendor 5 minutes ago.

That's right 

Still not a 100% mortgage.

If we extend this out to a further extreme there must be a point at which the lenders would be 'in'.

For example, what if the deposit were 15%? Or the vendor matched the buyers deposit of say 5% each, so both are contributing? 
What about some govt backing to help FTBs?

Is there not a point at which the lenders would be happier?

housebuyer143

Almost no lenders allow Vendor gifted deposits, which is what this is - so it does not work in reality. 

user1977

Francis63 said:

user1977 said:

Francis63 said:

user1977 said:

Francis63 said:

user1977 said:

Francis63 said:

Slithery said:

Francis63 said:

The vendor is simply willing to lose £15k for a quick sale and a sure sale (no chain)

What makes you think that selling to a FTB will be 'quick and sure'?

There are plenty of sellers who wouldn't even consider a FTB unless it was there only option due to how slow and unsure they are as buyers due to never having been through the process before, having unrealistic expectations and panicking about the tiniest things brought up in a survey,

I think if someone is willing to pay your deposit for you (or a large chunk of it) as a FTB you would not want to back out on a whim. It could be your only chance. 
As I say, I was lucky enough to start off on a 100% mortgage, without that where would I be?

And why do you think 100% mortgages aren't available any more?

But this won't be a 100% mortgage

So is there any equity actually being put in by the buyer? If not then it is a 100% mortgage.

Yes, there is. The gift from the vendor. 

Which isn't actually being put in by the buyer then. It's come from the vendor 5 minutes ago.

Is there not a point at which the lenders would be happier?

I can't see it happening in a "standard" transaction. You get various types of incentives typically provided by housebuilders, but those are carefully quantified these days. And it might be permitted where the parties are connected and e.g. a parent is "gifting" the equity to their child.

Francis63

eddddy said:

Francis63 said:

Something has to be done. What better idea? Not every vendor will be willing, but if a simple no chain quick sale is desired this would be a kind solution for both parties...and help the housing market stay afloat.

So do you agree that mainstream mortgage lenders don't allow 'vendor gifted deposits' (although there may be one or two expensive sub-prime lenders who do)? Or are you challenging that?


So your question is essentially "Why don't lenders accept vendor gifted deposits?".

There are probably 2 significant reasons...

• The mortgage lender wants you to have some 'skin in the game'.  If you buy a £300k house with a £300k mortgage, you don't have a huge incentive to 'stick with it'. If the value of the house drops, or you get fed-up with paying a mortgage, you might decide to give the keys back to the lender and walk away - because you won't lose anything. (Although your credit history will be shot to pieces.)

• The mortgage lender would prefer to see that you've had the financial management skills to build up some savings. It's reassurance that you'll have the financial management skills to manage a mortgage. Although, your argument about rent sometimes being more than mortgage payments makes sense. (And some lenders allow deposits gifted by family, which contradicts this a bit.) 

Mortgage lenders average out risk. As you say, you had a 100% mortgage and you managed it fine. But I guess there's a significant percentage of people who didn't.

In your example, you say that lenders can get their money back if they repossess - but lenders don't want to have to do that. They prefer to take on business with a lower risk of repossession.

Thanks Eddddy, I'm sure most lenders don't offer this, but what I'm saying is s solution is needed. 

You can't stay living with your parents into your 40's.
You can rent privately, but it's a terrible waste of money, and usually more expensive than a mortgage, also reduces ability to save for a deposit.
You can try to rent social housing, but this is incredibly limited unless you are in desperate need, and it's not a great idea to deliberately put yourself in that need just to get the housing.
You can go and live in a cheaper (poorer?) area, but you may not find employment there, so wind up with a home but on unemployment benefits, and far from your roots.

House prices generally go up. Were I a FTB now, I would even be willing to pay a higher price for my property if the deposit be paid (even half of it) so that I could just get on the ladder, in preference to the other options above. 

Francis63

user1977 said:

Francis63 said:

user1977 said:

Francis63 said:

user1977 said:

Francis63 said:

user1977 said:

Francis63 said:

Slithery said:

Francis63 said:

The vendor is simply willing to lose £15k for a quick sale and a sure sale (no chain)

What makes you think that selling to a FTB will be 'quick and sure'?

There are plenty of sellers who wouldn't even consider a FTB unless it was there only option due to how slow and unsure they are as buyers due to never having been through the process before, having unrealistic expectations and panicking about the tiniest things brought up in a survey,

I think if someone is willing to pay your deposit for you (or a large chunk of it) as a FTB you would not want to back out on a whim. It could be your only chance. 
As I say, I was lucky enough to start off on a 100% mortgage, without that where would I be?

And why do you think 100% mortgages aren't available any more?

But this won't be a 100% mortgage

So is there any equity actually being put in by the buyer? If not then it is a 100% mortgage.

Yes, there is. The gift from the vendor. 

Which isn't actually being put in by the buyer then. It's come from the vendor 5 minutes ago.

Is there not a point at which the lenders would be happier?

I can't see it happening in a "standard" transaction. You get various types of incentives typically provided by housebuilders, but those are carefully quantified these days. And it might be permitted where the parties are connected and e.g. a parent is "gifting" the equity to their child.

...you're coming round 

Francis63

housebuyer143 said:

Almost no lenders allow Vendor gifted deposits, which is what this is - so it does not work in reality. 

Currently...but something needs to be done, so I'm only saying, maybe it could be looked at again. In some form. Maybe tweeked by someone with more imagination than me.

I've got to go out now...dog walking for the Cinnamon Trust Charity...see some people are a little charitable when the cause is good.