Can a seller help a buyer with their deposit?

kingstreet

Halifax was the last lender out of the vendor gifted deposit market in July 2012. So far, no lender has sought to re-enter the space.

However, equity gifted by landlord to tenant is still possible, as is concessionary purchase from a relative and the builder gifted deposit as part of newbuild incentives.

Thrugelmir

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!

Lending money is a totally different business to selling pallets of baked beans in Lidl's. Lenders have no need to offer such schemes. Adequate business as it is. Remember Northern Rock? That's how to get your business model badly wrong. 

MaryNB

Francis63 said:

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. 

Until they hit the LTI limit. For many FTBs that's the limiting factor. I had a 20% deposit and a decent salary but still needed to visit the bank of mam and dad. 

House prices rises continue to outstrip wage inflation and affording housing continues to be difficult and I agree something needs to change but this is far from the silver bullet you seem to think it is.

• Many sellers won't consider this as they'll be trying to fund their onward purchase. And at the moment houses in many area are going SSTC in a very short time, sellers don't need this incentive.
• At the moment estate agents need more houses on the market to sell, they have plenty of buyers. 
• FTBs have HTB and Shared Ownership which will be far more helpful that waiting around for a charitable sellers. I mean, these obviously don't solve the wider issue but they're far more feasible options on an individual basis. 
• Banks want low risk transactions. Your proposal doesn't increase the number of mortgages being granted (because the limiting factor at the moment is number of houses for sale), it just increase the proportion of riskier transactions. There's no incentive that I can see for lenders. 
• The industry has become more risk adverse - LTI caps, no 100% mortgages, stricter income checks. Banks need to check for money laundering so reduce the pool of potential giftors. 

user1977

Francis63 said:

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 

No, it would still be a load of ballcocks in a normal arm's length deal to pretend that there's "equity" which in reality is just the vendor waving a wad of their own cash.