Mortgage Query

downwithit

Hi,

Would anyone here be able to advise (broker, banker) me on a house purchase. I have been offered a property from a family member, but currently do not have the min 10% deposit required. She is willing to leave this as a long term loan whilst telling the bank I am giving it to her directly. So for example house value €300,000. I request loan of €270,000 and deposit is paid directly to the owner.

Would a bank approve that, is there any need for them to see the deposit transaction happen? as their equity is covered with the €300,000 which is even lower than market value as any independent valuation by the bank will show.

My savings will cover legals stamp duty etc etc

Any professional advise appreciated

lau1247

downwithit wrote: »

Hi,

Would anyone here be able to advise (broker, banker) me on a house purchase. I have been offered a property from a family member, but currently do not have the min 10% deposit required. She is willing to leave this as a long term loan whilst telling the bank I am giving it to her directly. So for example house value €300,000. I request loan of €270,000 and deposit is paid directly to the owner.

Would a bank approve that, is there any need for them to see the deposit transaction happen? as their equity is covered with the €300,000 which is even lower than market value as any independent valuation by the bank will show.

My savings will cover legals stamp duty etc etc

Any professional advise appreciated

Non professional advise but i would think the bank would want to see it as a minimum. I thought a deposit was needed as a minimum from what i read in AIB's mortgage guide a while ago. Maybe other bank is different

D3PO

no chance. Bank will expect to see proof of the deposit.

Plus even if it were possible what your suggesting there are potential tax implications for the family member who regardless of your term of it being a loan . It would be seen by revenue as a gift (as it is non interest bearing)

downwithit

If they just want to see it that would be fine... I can show how I just "received a gift of €30,000";) from another family member which I am transferring from my account to the sellers account. Now they have seen it. Is that it job done?

D3PO

No its not that simple. Id also suggest you tread very very carefully . What your suggesting is actually fraudulent.

Kerry_2008

I think they would want to see evidence of having a saving pattern as well. Just cause you have a deposit doesn't mean you get a loan.

downwithit

in what way? i don't understand?. i pay market value. I get mortgage of 90% of home value. Seller gets deposit. I pay deposit back next year with money that is coming to me instead of now. If I wait the year property is outside my price range.

Help explain what is the fraudulent aspect?

downwithit

I do have a savings and a regular saving pattern (just not full 10%), plus would be very confident of getting approval of that amount on our joint wages

miezekatze

I think the bank would want to see regular savings, I can't really see them giving you a mortgage like this if your entire deposit is a gift.

EDIT: just saw your latest post, I guess it might be worth a try then.

D3PO

downwithit wrote: »

in what way? i don't understand?. i pay market value. I get mortgage of 90% of home value. Seller gets deposit. I pay deposit back next year with money that is coming to me instead of now. If I wait the year property is outside my price range.

Help explain what is the fraudulent aspect?

How is it fraudulent

1) You must disclose any loans on your mortgage application your proposing not disclosing this loan
2) The "loan" has potential tax implications re gift tax pending the amount and relationship with the person again failing to disclose on this is fraudulent and tax evasion.

There are other aspects to consider too however there are policies on legal advsie on Boards.

Trust me what your proposing is fraudulent.

downwithit

But how many mortgages are approved without people declaring Credit Union loans?? and I understand that €30k would just fall under the CAT threshold.

So I don't really want to trust your word on it, would prefer some advise from someone in the industry

lau1247

downwithit wrote: »

in what way? i don't understand?. i pay market value. I get mortgage of 90% of home value. Seller gets deposit. I pay deposit back next year with money that is coming to me instead of now. If I wait the year property is outside my price range.

Help explain what is the fraudulent aspect?

As it was said, mortgage application have strict minimum requirements, what did your application guide says??

To the bank, they don't really care whether you pay market value or property price range will be outside of your range.

They really only care about whether you can show your history and ability to make the payment. Ability to make payment doesn't mean what you can afford up to you limit in terms of income. They need to make allowance for living expenses etc.

You mentioned that your saving can cover legal fees, stamp duty etc. surely that would take away a good chunk of your saving if you intent to use that as part of the deposit. And if they approve your mortgage, then you are effectively paying mortgage and towards deposit at the same time for quite a while. So to them it looks like you are very stretched, just my opinion.

downwithit

We have just used the mortgage calculators on our salary's from the banks own website and it shows we could be approved for up to €470,000 on our incomes and expenditure. So the value of the property and repayments would be well within our income. We would not be too foolish to overstretch ourselves especially with interest rates only going to go up from here.

I am due a similar amount to the €30k deposit but it will not be through for a minimum of 12 months so we are pretty keen to get a property bought ASAP as we have seen the price rise. This house could be bought for 260 or 270 6/8 months ago.

D3PO

downwithit wrote: »

But how many mortgages are approved without people declaring Credit Union loans?? and I understand that €30k would just fall under the CAT threshold.

So I don't really want to trust your word on it, would prefer some advise from someone in the industry

So becasue somebody else failed to declare CU loans it makes it ok for you to fail to disclose financial information too ?

Look go do whatever you want. However forget about contacting a broker they have a legal obligation to disclose these things in your application.

Its a mopto point anyway. You have no reasonable record of savings so 10% or not the bank wont approve your application and quite right too.

I dont care if you trust me or not what your suggesting is fraudulent thats a fact and Id only be too delighted for anybody trying to act fraudulently to be caught.

D3PO

downwithit wrote: »

We have just used the mortgage calculators on our salary's from the banks own website and it shows we could be approved for up to €470,000 on our incomes and expenditure. So the value of the property and repayments would be well within our income. We would not be too foolish to overstretch ourselves especially with interest rates only going to go up from here.

.

Thats debateable. If somebody that could get approved for 470k mortgage cant save 30k (or more than a few grand it would seem) then you would have to wonder if they really are best positioned to assess their own affordability.

downwithit

as sure look it, I know

lau1247

downwithit wrote: »

We have just used the mortgage calculators on our salary's from the banks own website and it shows we could be approved for up to €470,000 on our incomes and expenditure. So the value of the property and repayments would be well within our income. We would not be too foolish to overstretch ourselves especially with interest rates only going to go up from here.

I am due a similar amount to the €30k deposit but it will not be through for a minimum of 12 months so we are pretty keen to get a property bought ASAP as we have seen the price rise. This house could be bought for 260 or 270 6/8 months ago.

Keep in mind, those calculator is only a quick calculator, actual mortgage is usually based on individual circumstances.

I know a friend applied for mortgage three years ago, even though his wife was working and earning an income, the bank actually wouldn't take her income into consideration. So each situation is slightly different. Only the bank can really tell you.

downwithit

Thanks Lau1247, just trying to get myself in the best position before I approach the bank or broker and see what would be the best option for me to show the bank

Thoie

When I got my mortgage, my SSIA was expiring about 6 weeks after I was going to draw down the mortgage. A family member was going to loan me that amount for the "missing" weeks, and I'd repay them as soon as the SSIA came through.

The bank needed a letter from the family member saying that they had no claim on the property as a result of this loan.

Bear in mind that the bank will also do an evaluation/survey. If their survey comes back and says the house is only worth €250k, then they'd only loan you €225k (instead of the €270k in your example). How would that leave you with the original seller if that was the case?

Kerry_2008

The bank will look to see you can meet the repayments after a stress test etc. Take it from someone that worked in a mortgage brokers for a few years those quick quote calculators on bank websites etc mean nothing. It the actual application that will give your final figure.

Those calculators are on income alone where as the underwriter will take things like, living expenses, savings history, credit rating, even the jobs you do into account.

I don't know about the legality of the whole 'gift' idea. Especially seeing as you know before hand you are paying it back. It would be different if circumstances changed afterwards and you were asked to pay it back. I suppose if you can get away with it and are able to meet the repayments on the mortgage until its cleared it wouldn't matter

johnnyskeleton

downwithit wrote: »

But how many mortgages are approved without people declaring Credit Union loans?? and I understand that €30k would just fall under the CAT threshold.

So I don't really want to trust your word on it, would prefer some advise from someone in the industry

Just because everyone else on the road is speeding, doesn't mean that if you exceed the speed limit you are not committing a criminal offence.

downwithit

Thanks for this,

I really feel the repayments are very affordable for us at present. We have no real outgoings bar our rent at present which is €100 per month less than the repayments on €270k over 30 years (we should have been saving more, but cant change the past). We have about 15k in savings which we want to hold on to to cover stamp duty, legals etc and as a back up if ever needed in future new car etc. The letter from the loaner would also be OK.

I have rang four local agents to get a rough idea of values for properties all four were over €300k so would also be confident of the bank evaluation coming in with my figures as chances are they may be using one of the local agents I spoke with for this purpose.

johnnyskeleton

downwithit wrote: »

We have just used the mortgage calculators on our salary's from the banks own website and it shows we could be approved for up to €470,000 on our incomes and expenditure. So the value of the property and repayments would be well within our income. We would not be too foolish to overstretch ourselves especially with interest rates only going to go up from here.

I am due a similar amount to the €30k deposit but it will not be through for a minimum of 12 months so we are pretty keen to get a property bought ASAP as we have seen the price rise. This house could be bought for 260 or 270 6/8 months ago.

How could someone be on such brilliant wages not be able to save €30k?

Also, if it is a relative selling the property to you, and at an undervalue because of your relationship, why can't they wait another year without racking up the price? It all seems very odd to me!

downwithit

johnnyskeleton wrote: »

Just because everyone else on the road is speeding, doesn't mean that if you exceed the speed limit you are not committing a criminal offence.

No but if I slow down before I pass the Gatso Van I will not be caught

roro2

downwithit wrote: »

I have rang four local agents to get a rough idea of values for properties all four were over €300k so would also be confident of the bank evaluation coming in with my figures as chances are they may be using one of the local agents I spoke with for this purpose.

If you buy the house for below market value, there will be further gift tax implications.

downwithit

johnnyskeleton wrote: »

How could someone be on such brilliant wages not be able to save €30k?

Also, if it is a relative selling the property to you, and at an undervalue because of your relationship, why can't they wait another year without racking up the price? It all seems very odd to me!

Its only fair that they are paid market value, I would not expect to sell it to me less than that. Plus trust me its not brilliant wages both of us are below 50K

downwithit

roro2 wrote: »

If you buy the house for below market value, there will be further gift tax implications.

It would be very close to market value and would just be a good buy in the area as opposed to below market value

D3PO

downwithit wrote: »

Its only fair that they are paid market value, I would not expect to sell it to me less than that. Plus trust me its not brilliant wages both of us are below 50K

Just goes to show you how stupid these online calculators are. So your looking at a mortgage roughly 3x your combined salaries with no savings history of note.

Your wasting your time regardless of what fraudulent way you try and spin the deposit. Have fun trying though.

downwithit

D3PO wrote: »

Just goes to show you how stupid these online calculators are. So your looking at a mortgage roughly 3x your combined salaries with no savings history of note.

Your wasting your time regardless of what fraudulent way you try and spin the deposit. Have fun trying though.

Are sure look it, I know

The_Conductor

downwithit wrote: »

But how many mortgages are approved without people declaring Credit Union loans?? and I understand that €30k would just fall under the CAT threshold.

So I don't really want to trust your word on it, would prefer some advise from someone in the industry

None anymore- your CU loans are registered with the Bureau now- and will show up when a lender queries your record.

Thoie

As long as the bank/broker/solicitor are aware of the story with the deposit, I don't see how it's fraud.

The seller will get all their money. The bank will give the mortgage, or not, based on their own criteria. They'll insist that the person loaning the deposit declares that they have no claim to the property or any portion. The OP will find out from Revenue what he needs to declare about the deposit loan. No-one's being done out of anything.