Buying a house, deposit question.

[Mercenary Keyboard Warrior]

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.

Another reason deposits are higher right now, although closer to long term sensible deposits than recent history (100%/105% mortgages), is that there is little certainty on the value of houses.
Statistics can be manipulated but generally I believe from the numbers I have looked at there is at best a flat market for the majority of the UK, although for most its slightly downwards. The banks recognise this and are covering their bets by getting a larger deposit, take into account the time to reposess, that they won't want to hold out for a long time to sell a house at top $, they are using the 15-20% deposit to ensure they can exit a default case and not end up out of pocket.
During peak house price inflation times, house were going up in "value" so fast a 100% mortgage was often a 80% mortgage within 2-3 years anyway. Thats not going to happen in the UK for many years to come.
Its just the same as the now virtually non-existant do-it-upers. They wern't making hardly any profit from doing up the house, they were making the money by the fact house price inflation was so high the money they invested was making a higher return than it was costing them to pay whilst they did it up.

 

[sicknote]

If the 12K is dependent on the sale of the property then it is not the same as your parents giving you the money. It is a reduction in the asking price.

What if your parents owned the house you were buying and the sale depended on the 12k deposit? Still fraud?

 

[krooton]

What if your parents owned the house you were buying and the sale depended on the 12k deposit? Still fraud?

Technically I believe it is. I think the sticking point is the deposit is being funded by the seller, if it were someone external from the whole thing, then there would need to be some documents and whatnot signed (like we did, my gf's sister gave us some cash towards our deposit).

 

[jamief]

What if your parents owned the house you were buying and the sale depended on the 12k deposit? Still fraud?

It is still the same. It is a VENDOR gifted deposit. It doesn't matter if the vendor is a stranger, a company, your best mate, your mum, your dad or your brother.

 

[latchy9]

I don't often post, but I thought I'd add my two penneth worth...

Firstly, I find it incredible that anyone working for a bank can complain about potential fraud when they have been lending outrageous amounts on "self certified" (aka liar) mortages for years. When these go pear shaped (because they failed to make even basic checks on affordability), they come crying to the taxpayer to bail them out. I call that corporate fraud that we all have to pay for.

Secondly, the way around this is to arrange a completion bonus. This means that the full asking price is paid and a seperate contract is in place that commits the seller to making a payment to the buyer equal to say 10% or whatever amount they want. The buyer needs to 'borrow' the deposit for one day and then repay this on completion. This is perfectly legal and is sometimes used by new build companies to shift properties.

The bank is not being defrauded as the full valuation price is paid and any stamp duties etc are payable. It does enable a low deposit purchaser to still get on the ladder though.

 

[The Halk]

Firstly, I find it incredible that anyone working for a bank can complain about potential fraud when they have been lending outrageous amounts on "self certified" (aka liar) mortages for years. When these go pear shaped (because they failed to make even basic checks on affordability), they come crying to the taxpayer to bail them out. I call that corporate fraud that we all have to pay for.

You need to be more accurate, your accusations against me are entirely unfounded and false.

Secondly, the way around this is to arrange a completion bonus. This means that the full asking price is paid and a seperate contract is in place that commits the seller to making a payment to the buyer equal to say 10% or whatever amount they want. The buyer needs to 'borrow' the deposit for one day and then repay this on completion. This is perfectly legal and is sometimes used by new build companies to shift properties.

The bank is not being defrauded as the full valuation price is paid and any stamp duties etc are payable. It does enable a low deposit purchaser to still get on the ladder though.

This is where my knowledge becomes shaky to say the least. My understanding would be the conveyancing solicitor would be under a duty to inform the bank of this additional arrangement, at which point we'd decline the lending, rightly so.