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Vendor gifted deposit

Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
I'm looking at at buying a house costing 60k. We don't have a deposit saved yet (just paid off debts so beginning to save a deposit, will prob take about a year to save) The ad says there's 10% vendor gifted deposit. I don't really understand how this works. Can anyone explain it to me please!

Comments

  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    It means that they put 10% in. You'd not actually get 6000, but it would all work out when your mortgage is sorted out.

    You may find you have to arrange the mortgage through an advisor the seller specifies, as they will be creative to sort out the discount.

    Best thing is to ask them to explain it, because offers vary.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    lol it means they're desperate to get rid of it before house prices collapse, you buy at your peril for the next few years. our housing bubble is bigger than america per capita and things aren't exactly pretty over there. down 15% YTD and no bottom in sight.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Not sure how much 60K buys in England but I'd go with Senor Miquel - the vendors are desperate to get rid of their property.

    To be extra safe and sure, get a surveyor to thoroughly check out the house. It might have dry rot and that is a nighjtmare and costly to get rid of. Or ever woodworm. 60K seems quite a small amount unless the property is off grid somewhere, like up in the boonies. I am sorry I don';t know what "Vendor gifted" means.

    You'll probably be required to give at least 10% deposit for a mortgage. But good luck.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Forgot to add .. how many bedrooms has the house got, is there any garden and what is the area like? If it is a rough area, a cheap property is less likely to appreciate in value. But the housing market I am told is on its knees. So maybe you will have a bargain there. :)

    Poppi
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Its not in England its in South Wales where property prices are much cheaper. It is bottom of the market but that's what we're looking for. Its a 2 bed terrace

    So does it mean I pay £60k, £54 goes to the vendor and £6k goes to the mortgage company as a deposit? I know that your choice of mortgage lender is very restricted this way but its a way of getting on the property ladder

    To be honest I wouldn't be too worried about losing money on this one, we' be buying to live in for a few years and do it up. Its so cheap already I doubt it'll lose much value and we'll effectively save the £7k we'll waste renting for another year and a half while we save a deposit
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
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  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Have you had a look around at mortgage deals at the moment? Most decent ones at present are asking for at least a 20% deposit.

    The vendor gifted deposit means that basically, you pretend to the mortgage company that you've bought it for £60K but you've actually only paid £54K for it. You then get a mortgage for £54K with the mortgage company thinking that there is another 10% of equity in the property that you have paid for outright.

    But you have to tell them don't you? That's why you're limited in choice?

    There's a few mortgage lenders asking for 10% deposits at the moment. If no-one would give us a mortgage with a vendor gifted deposit then that's dilemma over anyway! But if they would then is it a sensible way to go?

    Also bearing in mind the money we'll waste renting in the next year and a half to save a deposit would outweigh a drop in price up to 10%
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    kangoo wrote: »
    But you have to tell them don't you? That's why you're limited in choice?

    There's a few mortgage lenders asking for 10% deposits at the moment. If no-one would give us a mortgage with a vendor gifted deposit then that's dilemma over anyway! But if they would then is it a sensible way to go?

    Also bearing in mind the money we'll waste renting in the next year and a half to save a deposit would outweigh a drop in price up to 10%

    That's what I was mentioning about having to arrange it through an advisor that the building company specifies for you. They then work the numbers. Otherwise the mortgage companies dislike the fact that you've essentially had a massive discount.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    it is perfectly legal but for a 90% LTV mortgage you are looking at higher borrowing costs plus specialist broker/solicitor fees, and the 10% "equity" will be gone in a year, nothing in life is free remember. renting might not seem like such a bad idea a few years down the line, do some research before you jump in at the deep end.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    We're not jumping in yet, just finding out about it because we'd never heard of it before! After looking further into it we've decided to stay saving for a deposit and waiting but thanks for all the info and advice :) x
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