Buying a house, deposit question.

shep_no_platinum · 17 Apr 2012 at 22:12

So I'm looking into buying a house, obviously first thing is saving for the 10% deposit needed.

I've seen a lovely house where the owner has said they will physically pay the 10% deposit into the buyers bank account and you use this as you're deposit when getting a mortage. The only catch is you buy the property at full asking price with no offers.

This seems like a really kind gesture but aren't they just getting their money back in the long run and I'm getting a 90% mortgage without the hassle of having to save £10k+?

Cheera

cm1179 · 17 Apr 2012 at 22:15

and putting the price up by over 10% in the first place no doubt

fastwunz · 17 Apr 2012 at 22:18

They give you the ten percent you give them their full asking price thus they are very much quids in. Is it a new build or something or a privately owned home? It sounds rather dodgy to me and certainly not something a solicitor would entertain

piggeh · 17 Apr 2012 at 22:26

take the 10% and run

shep_no_platinum · 17 Apr 2012 at 22:40

It's a pre-owned 3 bed semi, I know the house well as its my dads friends. Honest chap an wouldn't swindle me. Just trying to help people get on the property ladder i take?

At the end of the day if he gave me £20,000k for a deposit he'd still get it back right?

VoG · 17 Apr 2012 at 22:51

shep_no_platinum said:
At the end of the day if he gave me £20,000k for a deposit he'd still get it back right?

Yup, i should imagine in your area 90% asking price is the norm, which he obviuosly accepts, so he bungs you 10% to allow you to get a 90% mortgage, you then pay 100% asking price ( giving him back his 10% deposit ), & he gets the 90% going rate for his house.

[TW]Fox · 17 Apr 2012 at 22:52

The catch is that most mortgage companies wont allow vendor gifted deposits, or if they do, the terms are sucky. They are not daft.

dirtychinchilla · 17 Apr 2012 at 22:53

shep_no_platinum said:
It's a pre-owned 3 bed semi, I know the house well as its my dads friends. Honest chap an wouldn't swindle me. Just trying to help people get on the property ladder i take?

At the end of the day if he gave me £20,000k for a deposit he'd still get it back right?

Seems like a very strange and frowned upon arrangement, but that's very generous of him, even though he will undoubtedly overcharge you by 1-%. I wouldn't rely on the family friend aspect, but I guess that could be seen as comforting.

Rotty · 17 Apr 2012 at 22:56

the problem could be getting the mortgage providor to agree to the valuation which has a fair chance of being inflated to allow for the 10%

[FnG]magnolia · 17 Apr 2012 at 23:12

[TW]Fox;21707129 said:
The catch is that most mortgage companies wont allow vendor gifted deposits, or if they do, the terms are sucky. They are not daft.

Rotty said:
the problem could be getting the mortgage providor to agree to the valuation which has a fair chance of being inflated to allow for the 10%

I came in to post both of these things but was beaten to it.

The Halk · 17 Apr 2012 at 23:14

It's a very common thing, it's called mortgage fraud. The banks I work for is on to it, and we've taken steps to eliminate it this year, I'd imagine other lenders are doing the same.

The problem for us is you buy a house for "200" except it's not worth 200, it's worth 180, and you lie to us and say it's worth 200 and you're paying 200, except you only pay 180.

Not only were you unable to save up the 20 deposit - which means you don't have a proven track record at being sensible with the money. But if we ever do repossess, we're going to lose that 20 off the potential value of the property.

Spamalot · 18 Apr 2012 at 00:35

The Halk said:
It's a very common thing, it's called mortgage fraud. The banks I work for is on to it, and we've taken steps to eliminate it this year, I'd imagine other lenders are doing the same.

The problem for us is you buy a house for "200" except it's not worth 200, it's worth 180, and you lie to us and say it's worth 200 and you're paying 200, except you only pay 180.

Not only were you unable to save up the 20 deposit - which means you don't have a proven track record at being sensible with the money. But if we ever do repossess, we're going to lose that 20 off the potential value of the property.

And you effectively have zero equity from day one. Not a good place to be.

Dr House · 18 Apr 2012 at 07:12

The Halk said:
It's a very common thing, it's called mortgage fraud. The banks I work for is on to it, and we've taken steps to eliminate it this year, I'd imagine other lenders are doing the same.

The problem for us is you buy a house for "200" except it's not worth 200, it's worth 180, and you lie to us and say it's worth 200 and you're paying 200, except you only pay 180.

Not only were you unable to save up the 20 deposit - which means you don't have a proven track record at being sensible with the money. But if we ever do repossess, we're going to lose that 20 off the potential value of the property.

But is that not why the bank gets an independent valuation done?

edscdk · 18 Apr 2012 at 07:27

The Halk said:
The problem for us is you buy a house for "200" except it's not worth 200, it's worth 180, and you lie to us and say it's worth 200 and you're paying 200, except you only pay 180.

But at least you can slap a AAA rating on a load of these crappy loans to people who will probably default - and sell them on at a vast profit, what's the worst that could happen...

Surveyor · 18 Apr 2012 at 07:33

Dr House said:
But is that not why the bank gets an independent valuation done?

It's one of the reasons and it's why there's a fair chance of the mortgage application being turned down.

The purchaser would effectively be trying to get a 100% mortgage and, even if that was available, it's not what is being applied for.

Good luck making the next mortgage application having been turned down for making a misleading/fraudulent application.

The Halk · 18 Apr 2012 at 08:10

Dr House said:
But is that not why the bank gets an independent valuation done?

Mortgage fraud isn't, no. We get the independent valuation done so we have a real figure on the value of the property. It's easy to get a friendly surveyor to up their valuation slightly and still not have it be "wrong". If we relied on customers getting valuations then on average they'd be perhaps 5% out - but none of them would be necessarily wrong.

The other reason is we have panels of surveyors who are vetted properly, because there is a liability in providing a survey we need to make sure it's a reputable company.

The Halk · 18 Apr 2012 at 08:12

Surveyor said:
Good luck making the next mortgage application having been turned down for making a misleading/fraudulent application.

It's something I've got a bit of sympathy for, the solicitors are the ones really at fault. Customers think if the value is 200 and they're paying 180 that it's ok, they don't follow the thought process all the way through - it's not intuitive. Solicitors know fine and well it's mortgage fraud and previously haven't cared. Of course my sympathy for a home buyer vanishes when mortgage fraud is explained and they still want to do it

shep_no_platinum · 18 Apr 2012 at 21:46

House was valued at £120,000 - £130,000k and the seller said they'd give me £12,000 for deposit if I buy it for £124,995.

Seems a good deal.

The Halk · 18 Apr 2012 at 21:48

It's mortgage fraud unless you tell the bank, and if you tell the bank they'll cut 12K off the value of the property, meaning you'll still need a deposit.

shep_no_platinum · 18 Apr 2012 at 21:50

How's it mortgage fraud? It's a friend helping someone? Similar to lloyds tsb lend a hand scheme?