Buying a house, deposit question.

The Halk said:
Right, what do I know....
Click to expand...

No need for that, It is a genuine question.

So, what would you do if some guy came into your bank with a deposit and a good credit history, stable long term job etc, and asked how large a morgage he could have?

Do you turn people down because they were given the deposit by someone?


And, do you stop people paying the valued, asking price? On what grounds?

Edit: This is the point, if the asking price is what it is valued at, and not an inflated price, where is the fraud?
 
Last edited:
It's been explained more than once in the thread already.... that's why I'm a bit miffed.

I'll explain again though.

There's nothing against being given the deposit by parents. That's fine. While someone who saved for it shows a propensity to save, someone who is helped by parents shows that they have helpful parents. Both are good traits.

What it centres on is the value of the property. Giving cash back is mortgage fraud because the bank lends a higher percentage than it intended to. It used to be called vendor gifted deposit and a very long time ago banks used to accept it, however it was tightened up because banks felt it was a bit of a scam. A house is worth what someone is willing to pay for it, if it's less than the surveyed price and it really is worth more then someone else will bid a higher amount, and the seller will take that instead. If it goes for less than the surveyed price it's banks experience that it's not worth as much.

You could still get 5% vendor gifted, 5% deposit a couple of years ago - I'm not sure if it's still available, I don't think it is. But really those were just marketing, they were still 95% mortgages, the banks added a sizable amount of interest because of the extra risk. Most banks didn't touch it.

When you buy a house you have to tell the bank how much you are paying for it. If cash moves under the table then you're misleading the bank over how much you're paying for it. Doing so on a mortgage is quite serious and it's fraud.
 
What it centres on is the value of the property
Click to expand...

This is what I am trying to ask you.

Is it only fraud *if* the value of the property has been inflated and is not *fair*?

I can totally understand it being fraud if the property is worth less than it is proposed to be, which yes, has been explained in the thread.


Edit: See what I'm asking here? If it centers around the value of the property, then some situations would be fraud and others would not be?
 
Last edited:
No... if the purchase price is not higher than the survey price then the purchase price is used as the valuation.

"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."

That's the example given.

He wants the bank to use 120-130 for the value. The right value is 112,995 because there is a 12K discount. He's not giving him 12K, he's passing him 12K under the table and trying to deceive the bank.

If he's honest with the bank he can say it's a purchase price of 113K, at which point the bank will ask for a deposit of 11,300. He doesn't have that.

From the banks point of view the house is not worth any more than 113K. If it was then the seller wouldn't sell it for less, and/or another buyer would come along.
 
Round in circles because I still do not understand how it is any different to being given the deposit by someone other than the house seller and paying the asking price.

It's like saying the asking price is 12k less because his dad gave him the 12k deposit.

It makes sense to me if the house was valued at 120k-130k and the guy wanted 150k and had been given 15k deposit by the seller... but just not in the example given :S
 
shadesofgrey said:
Round in circles because I still do not understand how it is any different to being given the deposit by someone other than the house seller and paying the asking price.

It's like saying the asking price is 12k less because his dad gave him the 12k deposit.

It makes sense to me if the house was valued at 120k-130k and the guy wanted 150k and had been given 15k deposit by the seller... but just not in the example given :S
Click to expand...

I don't know why you don't understand.

It is not the same as his dad giving him 12K. If his dad gave him 12K then he'd be paying 113K for the house, but he'd have 12K in his hand from his dad.

The person he is buying the house from is not giving him a 13K gift. He's inflating the sale price of the house to hide money going under the table, which the purchaser is going to use for a deposit.

If the bank knew what was going on then they'd see the real sale price was 113K not 125K. The purchaser and buyer are colluding together to defraud the bank.
 
With both examples the outcome is the same. If they both include paying the asking price that is.

Just cannot grasp why one is fraud and the other is not when you put both examples side by side. :(


Hmmm. So it would be fraud, no matter what, if the seller gives the buyer money then? Regardless of the ammounts involved? As I see it, it would be impossible for the seller to help the buyer because the bank would take whatever was given off the value?

If the seller went mad and offered the place for 100k and gave the buyer 50k the bank would say, nope, the real value is 50k?
 
shadesofgrey said:
Hmmm. So it would be fraud, no matter what, if the seller gives the buyer money then? Regardless of the ammounts involved? As I see it, it would be impossible for the seller to help the buyer because the bank would take whatever was given off the value?

If the seller went mad and offered the place for 100k and gave the buyer 50k the bank would say, nope, the real value is 50k?
Click to expand...

It's only fraud if the asking price is inflated to include the 'gift'. However there's no point in the 'gift' unless the price is inflated.

The seller is not helping the buyer anyway. It's not a gift, it's a discount.

If it really was a helping the buyer then the seller would sell the property for £125K to someone else and still hand Shep 12K. Clearly that's not going to happen since it's not a gift, it's a discount.

If the seller went mad and sold the place for 100K and gave the buyer 50K then they wouldn't be selling it for 100K. They'd be selling it for 50K, and the bank would quite rightly value it at 50K.

There isn't a 12K _gift_ here. It's a discount. It's an attempt to conceal the real buying price from the bank.
 
It's only fraud if the asking price is inflated to include the 'gift'.
Click to expand...
Yay. The original question finally answered :D Thank you.


However there's no point in the 'gift' unless the price is inflated.
Click to expand...
Well, as long as the asking price has not been inflated to accomodate the gift, and therefore no fraud, you could put it down to someone simply helping someone out! :p


Next question: What is the threshold of asking price Vs survey price etc that the bank would not consider the value to have been inflated? Just so if somebody was simply trying to help someone out they could do so openly and honestly without worry about the bank thinking you are trying to commit fraud?
 
I don't think you've understood.

The survey price is only there to reassure the bank that the purchase price is realistic, and the purchaser isn't paying too much.

The purchase price is then used to determine the value of the house.

Sale price £120K. Deposit £12K. Cash under the table... £12K. Fraud. Real sale price £108K
Sale price £108K. Deposit £10.8K. Cash under the table... £0K. Not fraud. Real sale price £108K.

If the vendor wants to help the buyer out then they reduce the selling price. There is no reason to hand the buyer cash, other than to try and deceive the bank.
 
Arg :)

There is a reason, the buyer needs a deposit to get a morgage.


Seriously, there must be a way (without commiting fraud, no intent to defraud the bank at all what-so-ever) that a seller can help a buyer by giving them the money for the deposit.

How can this be done, in an open and honest way? Is it simply impossible??? Come on there must be some kind of reasonable solution, without inflating the price? and without attempting to defraud the bank :S
 
shadesofgrey said:
Seriously, there must be a way (without commiting fraud, no intent to defraud the bank at all what-so-ever) that a seller can help a buyer by giving them the money for the deposit.

How can this be done, in an open and honest way? Is it simply impossible??? Come on there must be some kind of reasonable solution, without inflating the price? and without attempting to defraud the bank :S
Click to expand...

The seller doesnt want to 'help' the buyer, thats just a phrase to make it sound better. The seller wants to sell his house - provided its sold the seller presumably isn't bothered whether he accepts an offer of £112500 job done or an offer of asking price and a 'gift' of £12500 - he still gets his £112500. It isnt about 'helping the seller' its about selling his house.

A mortgage is a serious and longterm financial commitment for both the buyer and the bank. The bank wants to know the person they are lending an enormous amount of money to is financially responsible and able enough to repay the mortgage. One of the ways they do this is insisting on a deposit - the logic being if your house is a purchase thats been planned for some time and you are capable of servicing the mortgage, running costs etc etc you will normally have been able to build up a deposit instead of spending all the money on lulz.

This is why banks dont like no deposit and why when you could get 100% mortgages easily the terms were not as good as conventional mortgages, to reflect the greater risk of lending to somebody who hasn't been able to get a deposit.

It's also not great from your perspective either as it has quite a high chance of putting you in negative equity almost right away, it only takes a tiny fluctuation in house values for you to owe more than the property is worth, a risk thats far reduced with a decent deposit.

If you don't have a deposit then its probably not yet time to purchase a house. Contrary to popular beleif you don't fail at life if you dont own a property yet - renting is perfectly acceptable and a rational way forward for those who have not got a deposit.
 
don't forget that even if the 90% was agreed, you need to factor in the actual cost of the mortgage, the mortgage rate which will likely be 5% plus on a 90% mortgage and the fee's for the mortgage and solicitors fees etc.

If you currently have no deposit or funds available, adding in all the above it's not going to be a sensible option.
 
Also, if you were to take the seller's cash, which is certainly a mortgage fraud in my view, you would actually be buying the house at an artificially high market price. That means you are actually getting a bad deal on the house, because if no-one else in the country could buy it at that price, it's not worth that price, because the value of the house is what someone is prepared to (and can) buy it for.

Rgds
 
OldCoals said:
You bought a pallet load full of jeans mate.
Click to expand...

I didn't want to be the one that brought this up so thank you for doing it for me.

He's not 'doing you a favour', he's trying to offer you a fraudulent incentive because no one else is biting.

The jeans story was funny (for us, maybe not for you) but this is potentially fraud and it's depressing yet also slightly amusing that you're ignoring all of the good advice here and still want to go ahead with it. If you do, can you promise us you'll post the update when it all goes wrong? Thanks.
 
You must log in or register to reply here.
Back
Top Bottom