Mark contacted us last week as he had been let down by a high street building society that wouldn’t accept vendor gifted deposits, especially as the vendor was his Mother in Law.
Mark is looking to buy his first property with his wife and his Mother in Law is offering them her property as she is looking to downsize. She is offering a 10% discount off the true market value and Mark and Clare have a further 5% deposit from their own savings.
The majority of lenders do not accept vendor gifted deposits as it falls outside of their lending criteria however, Leeds Building Society are one of the few lenders that will with the provisos that the vendor, the Mother in law in this instance, does NOT remain in the property. As she is looking to downsize and therefore vacate the property at the time that Mark and Clare complete on the mortgage there will be no issues or potential conflict of interest.
Mark and Clare are now proceeding with their 85% mortgage application and subject to the property coming in at the declared value the application will proceed smoothly. In the event that the property is down valued either Mark and Clare will need to fund the additional deposit monies from their own sources or Mark’s Mother in Law will have to offer the 10% discount on the lower property value – sometimes easier said than done.
Don’t fall into the trap
We have had a few scenarios based on family vendor deposits where the family member wants to remain in the property after completion of the mortgage. For example where a Father/Mother offer a discounted purchase price to their children with the view that the children will look after them in their home. This type of mortgage is not possible due to the conflict of interest and will fall out of bed at the solicitor stage – albeit most lenders, based on our experience, will say they will take this type of mortgage on, in reality it will fall at the solicitor stage.