95% mortgage question

HGLTsuperstar

Friend has asked my advice on the following, but wanted to bow to the superior knowledge of (some of) the board to make sure on this:
FTB and has seen house on market for £120K, which given location, state of house etc is below market value, but vendor is emigrating so wants shot of it ASAP and has agreed to take £112K for quick sale.
Friend is a little short on 5% deposit, but as house is valued at 120, then 95% mortgage is £114K so could she get £112K or even 114 and have a bit for furniture etc.
My thought was no, as the lender will take it to be 95% of actual sale price, not what house is worth, but wanted to see if there is anyway round this?
thanks

herbiesjp

Lender will take 95% of the lower of the sale or valuation figure

HGLTsuperstar

That was my answer. However another suggestion, which I'm not sure about, was to go through with the sale at the full asking price i.e. 120K, but for the vendor to pay back the extra 8K, therefore get 95% mortgage on asking price and have the rest for a deposit. Is that legal, and how could the lender cotton onto this?

SPembo

I'm no expert, so not sure if this would work but it might be possible to get the seller pay the 5% deposit and play it that way. So property sale is actually approx 117,900, seller pays 5% deposit, leaving mortgage value approx 112k, leaving their savings for help with fee's/furniture. Hopefully someone will confirm if above is legit.

HGLTsuperstar

Can anyone shed light on SPembo's idea, would the mortgage lender kick up if they found out.
The other option is a 100% loan, best offer so far being Scottish Widows foxed for 2yrs @ 5.09% with a £295 fee. Anything better and/or thoughts on either of these points?
Thanks

Beddie

You could take Northern Rock's 100% variable rate mortgage. It's around 6% but it has no tie-ins. If the property really is undervalued then you could remortgage straight away using the higher valuation and get your hands on some extra money. I am not recommending this, but it's an option.

HGLTsuperstar

Beddie wrote:

You could take Northern Rock's 100% variable rate mortgage. It's around 6% but it has no tie-ins. If the property really is undervalued then you could remortgage straight away using the higher valuation and get your hands on some extra money. I am not recommending this, but it's an option.

So you can take the 6%, terrible rate, then go and get a better deal elsewhere straight away?

crisp

HGLTsuperstar,

in an answer to my question regarding mortgages based on valuation, on 1-10-05 you stated:

"They will pay on the sale price, not the valuation. The difference is your equity"

I pointed out that you were incorrect to which you disagreed, when you said:

"No I do understand what you're saying, just because I said what you didn't want to hear. If you buy at 85K, then they will give you 85%, 95% whatever of the sale price!"

How is my question different to your "friends" question?

I was right and you were wrong!

If you use a lender than lends "based on the lower of the sale or valuation figure", then manipulating the figures is fraud and you would be party to it. The lender will know because.....the solicitor is bound to advise the lender on the exchange price. Remember the solicitor acts for the lender too! Any attempt to pass money in paper bags, cash backs, deposits paid etc is fraud. Why will the solicitor know about money in brown paper bags, well if your friend is daft enough to trust someone they have never met to stick to the deal 100%, without contracts then what happens when they dont? such deals need to be subject to contract law.

remortgaging has risks too and some lenders will demand a min of 6-months since purchase plus you will be paying double the fees! I thought you knew about mortgages!

Your best bet is a lender that will lend on gifted deposits.

HGLTsuperstar

Dear crisp,
I didnt realise the aim was to score points off each other, with a playground mentality.
And yes the vendor can "pay your deposit" which is what I'm talking about, not what you were referring to

HGLTsuperstar

p.s. I never claimed to know about mortgages, so get your facts straight before you try and use sarcastic slurs.
END!

crisp

:-)

try Natwest, RBOS or BOS....I think one of the big banks did gifted deposits, but I cant recall which. but you will need a solicitor that understands what a gifted deposit is and how to structure a contract for them.