Deposit

antwilson

hi all,

weve being to see a mortgage advisor as we are looking at buying a house.

weve got a 5% deposit saved, but the one thing thats bothering us is the £1800 HLC as were borrowing between 90.1% and 95% LTV

We cant wait and save a bigger deposit as weve got a baby on the way!

What im wondering (seen it while looking on rightmove etc) is, if we see a house we like for say £95,000, could we offer £90,000 - and if accepted ask if we could pay £95,000 for the house, and use £5000 as another 5% deposit - avoiding the HLC, and getting a much cheaper deal.

If it is possible, how would this work?

Thanks

homer_j_3

You are describing a vendor gifted deposit by the sounds of it.

It is possible and plausible to do it, however, you need the agent to understand it, you need the seller to understand what you are doing and you also need to find the property that you like.

My experience is that even though sellers will accept reduced prices, it doesnt mean that they will do the gifted deposit.

Tiddler_2

You also need the lenders valuer to value it at the higher price, which might be the main problem.

Which mortgage lender have they recommended?
Do you have any credit problems? What are your incomes/current credit commitments?

Some lenders do not charge a HLC so maybe there are other options

antwilson

you also need the lenders valuer to value it at the higher price, which might be the main problem.

Which mortgage lender have they recommended?
Do you have any credit problems? What are your incomes/current credit commitments?

Some lenders do not charge a HLC so maybe there are other options

It was natwest we went to see (also went to see one at an estate agents but wasnt impressed) No credit problems - incomes are £16500 and £14000-£15000. Being told we can borrow upto £109,000 with my loan and credit card going out (£155pm and £50pm)

maninthestreet

antwilson wrote: »

hi all,

weve being to see a mortgage advisor as we are looking at buying a house.

weve got a 5% deposit saved, but the one thing thats bothering us is the £1800 HLC as were borrowing between 90.1% and 95% LTV

We cant wait and save a bigger deposit as weve got a baby on the way!

What im wondering (seen it while looking on rightmove etc) is, if we see a house we like for say £95,000, could we offer £90,000 - and if accepted ask if we could pay £95,000 for the house, and use £5000 as another 5% deposit - avoiding the HLC, and getting a much cheaper deal.

If it is possible, how would this work?

Thanks

I'm confused - exactly what price will you be paying for this house - £90,000 or £95,000? Why would you want to pay the seller £95,000 for the house if you've already offered, and they have accepted, £90,000??

nrsql

maninthestreet wrote: »

I'm confused - exactly what price will you be paying for this house - £90,000 or £95,000? Why would you want to pay the seller £95,000 for the house if you've already offered, and they have accepted, £90,000??

The idea is that you agree a price of £95,000 but only pay £90,000 (or get £5,000 cashback). The mortgage valuation is then on £95,000 and you have £5,000 extra deposit and the mortgage company thinks there is extra equity in the property and so charges a lower rate.

It used to be a common ploy.

Mac_Sami

True, but the OP hasn't provided a figure for the deposit they will be providing. Whilst complex, the route the OP is considering makes it look like a deposit is being paid, in order to get a slightly more favourable mortgage i.e. without the HLC.

If the OP can tell us what sort of deposit they have, as well as how much money they have to cover costs such as legal fees, searches, etc, then perhaps people can better advise the OP.

Tiddler_2

OP has stated that they have a 5% deposit.

In terms of the property you are looking to buy then it would appear that there are a few lenders who don't charge a HLC who would be able to lend you the amount required such as Nationwide BS.

The initial rate may be slightly higher than you have been quoted by RBS (I've not checked) but you'll save the cost of the HLC, which you would be paying back for the next 25 years or so.

Nationwide will only lend 95% LTV if you go direct so check out their website for the sort of deal you like.

If you can get it agreed at 90% LTV via the vendor deposit, then you would also benefit from a lower interest rate aswell.

Ideally I think you need to speak to the vendors to see if they are prepared to "do the deal" if they are speak to a good Whole of Market broker who can will also tell you about deals that can only be obtained by going direct. (You may have to pay a fee for their time in researching the market, but paying £100 or so, to get a much better deal will be well worth it.

antwilson

nrsql wrote: »

The idea is that you agree a price of £95,000 but only pay £90,000 (or get £5,000 cashback). The mortgage valuation is then on £95,000 and you have £5,000 extra deposit and the mortgage company thinks there is extra equity in the property and so charges a lower rate.

It used to be a common ploy.

I thought it would work as - price is £95,000

we offer £90,000, thats accepted, we ask if they would consider us paying £95,000 for the property, and using that £5,000 as an extra deposit.

Then they would not lose out anyway, and we would get better rates and avoid HLC. Are there any complications in doing things this way? Do we need to check with the lender first that they will accept this?

silvercar

You would have to get the sellers to accept it, you would also have to get agreement from your solicitor and the seller's solicitor. Some solicitors feel that this is underhand, bordering on dishonest; some don't.

You would have to declare the gifted deposit to the mortgage lender. Some will not accept it, a broker would know who would look favourably.

You would also need the valuation to come in at the higher price as LTV calculations are based on the lower of valuation and agreed price.

At your price range there is no stamp duty, but if the price were over the stamp duty threshold it would mean higher stamp duty.

If the seller has not lived in the property as their home for their whole time of ownership (ie if it was let at any time), they will not want to increase the price if it means a larger CGT bill for them.

homer_j_3

The advertised price is 95k. You would hope that in todays market, a deal could be struck and if the seller would be happy to accept 90k on completion then providing the solicitors and estate agents etc know what you are doing, you can make this paper exercise do what you want.

The lender needs to accept vendor gifted deposits though - that is important and as it has been said before, it is important that the actual property values up to 95k in the first place.

As long as all parties are aware and happy then you are right to try and do this if you can as it will save you money.