100% mortgage query

Lenafish

At the start of the summer we started looking at whether we could be homeowners, at this point a relative offered us the deposit, of which we were fantastically grateful. We have since found a place and been processing the purchase of this house, sales price: £166,500 of which a 5% deposit was promised.

We are at the point of exchanging contracts (have been for 2 weeks!) and the relative has let us down at the last minuite. The money is just not coming, so we have to make a decision on what to do. The options we see are;

a) Walk away, continue to rent until we can afford a deposit (probably a few years now) and loose all the money and energy we have put into this purchase, or

b) Get a personal loan for the amount of the deposit, to be paid off in the next 2/3 years and on top of our mortgage, or

c) Apply for a 100% mortgage?

At the moment we are most interested in option 'c', but are very concered, with either option b or c, about taking on too much debt or making a mistake.

Any advice on 100% mortgages and our options would be fantasic and help us a lot.

alexei_2

As the market appears to be cooling, how about come clean about your situation and see whether or not the vendor will accept a lower offer!

It really depends on the vendors position - how desperate they are to sell.

Explore other options once you have had a response.

MarkyMarkD

Getting the price reduced won't address the lack of deposit - it just means you need 100% of a smaller amount.

100% mortgages are available - use a search engine like the one at Charcol Online to see what you can get if you need 100%.

You will probably have to pay slightly over the odds.

A personal loan isn't a good idea - the deposit is meant to come from your own resources and if you borrow it without telling the prospective lender you are committing fraud.

We had a 100% mortgage when we bought our previous house - after a while we had enough money to pay off some of the balance and it was no longer 100% so we asked the lender to reduce the rate and they did.  Alternatively you could remortgage after you are out of any penalty period and if, by then, the house value had increased, you would no longer need 100%.

chillipepper_3

If you can get the vendor to drop the price by 5 % and get them to inform their solicitor that you have paid them 5% cash and vice versa with your solicitor that you have paid them direct, then technically you've paid your deposit ( when you haven't), solicitors dont get there hands on the money, you get your 95% mortgage as planned, vendor gets a sale, problem sorted.
This is possible as a good friend completed his first buy like this a few years ago BUT you need the vendor to be prepared and have the savvy for this kind of thing.
100% mortgage is probably the easiest option though.
Hope things work out.

MarkyMarkD

If you can get the vendor to drop the price by 5 % and get them to  inform their solicitor that you have paid them 5% cash and vice versa with your solicitor that you have paid them direct, then technically you've paid your deposit ( when you haven't), solicitors dont get there hands on the money, you get your 95% mortgage as planned, vendor gets a sale, problem sorted.

Yes, good idea, except that it's FRAUD which is a criminal offence.

payless

Yes, good idea, except that it's FRAUD which is a criminal offence.

if the situation is explained to all parties including the lender ( usually via solicitor) then if they agree ( and I have known cases in past where they have) then it's not fraud

MarkyMarkD

@doug and @payless

It's fraud either way. You have to declare all your debts - whether they are documented or informal from friends/relatives. And you have to state the actual purchase price of the property to the lender - irrespective of whether the vendor and the solicitors know you are doing a dodgy deal, it's mortgage fraud if you don't tell the lender.