How do most people get their deposit to buy a house?

lima

Lombardo86 wrote: »

You are not the only person who works hard though. I work hard and am progressing in my career nicely, i earn above average wage and am in a relationship where my partner earns above average wage. We have our holidays each year, we have a car, eat out and live a happy, healthy life.

When we moved into our house i never asked anybody for anything. My parents offered to refurbish one of the rooms for us completely.

Do i lose that sense of accomplishment and admit im a failure if i accept the donation?

You may not have taken anything but the ability for a parent to help their child out is probably completely satisfying to a) the parent and b) me, in my case.

Your arguments are silly and are nothing but thinly veiled "i did it on my own" posts

Some people on here almost feel like they're entitled to take money from their parents, that old entitlement thing again!

I'm not actually arguing, I did do things on my own, which for me derives more satisfaction than getting free handouts. If you want to feel great getting things for free then that's perfectly ok, I would feel less accomplished if I did though. as I get a kick out of making it on my own.

Anyway I'm off to the other side of the world for a holiday so I bow out..

runawaybishop

lima wrote: »

Some people on here almost feel like they're entitled to take money from their parents, that old entitlement thing again!

Do they, where do you see that?

Panda_Turtle

lima wrote: »

Perhaps people like you don't get the protestant work ethic?

The protestant work ethic? Lol. Do you live in Northern Ireland? Why bring religion into this.

So lima, if you had kids and could easily afford to give them a few grand towards a deposit, your saying you wouldn`t do it?

keane2097

Could we not have a separate thread about the morals of parents giving money to children for the three people interested in discussing it?

This thread is in bits.

Malari

Panda_Turtle wrote: »

The protestant work ethic? Lol. Do you live in Northern Ireland? Why bring religion into this.

Oh good grief...

http://en.wikipedia.org/wiki/Protestant_work_ethic

Panda_Turtle

Malari wrote: »

Oh good grief...

http://en.wikipedia.org/wiki/Protestant_work_ethic

Yeah, I read that b***sh1t already.

Barely Hedged

lima wrote: »

Some people on here almost feel like they're entitled to take money from their parents, that old entitlement thing again!

I'm not actually arguing, I did do things on my own, which for me derives more satisfaction than getting free handouts. If you want to feel great getting things for free then that's perfectly ok, I would feel less accomplished if I did though. as I get a kick out of making it on my own.

Anyway I'm off to the other side of the world for a holiday so I bow out..

I looked at a mortgage application form recently and it had in the list of savings contributing to a mortgage - "money from other sources". Not investments, secondary income etc. An entirely separate section with the implication being that it was money gifted from parents.

Its a bit of a mad situation where one of the biggest banks in the country normalises the behaviour of parents gifting cash by placing it in its own sub section on the mortgage application.

If every person did it, what would the net benefit to society? People trying more and more to outdo themselves to accumulate the biggest amount of long term debt. Forget the fact that its money for a property, its not. Its money for bigger debt and then the property comes > 20 years later.

Its a feature of an inefficient market, like there are other examples in many different markets. Nothing in life is ever black or white but you have your blinkers on and fail to fully appreciate the fact

The Spider

lima wrote: »

Perhaps people like you don't get the protestant work ethic?

Isn't the queen a protestant?

The_Morrigan

Barely Hedged wrote: »

I looked at a mortgage application form recently and it had in the list of savings contributing to a mortgage - "money from other sources". Not investments, secondary income etc. An entirely separate section with the implication being that it was money gifted from parents.

Its a bit of a mad situation where one of the biggest banks in the country normalises the behaviour of parents gifting cash by placing it in its own sub section on the mortgage application.

If every person did it, what would the net benefit to society? People trying more and more to outdo themselves to accumulate the biggest amount of long term debt. Forget the fact that its money for a property, its not. Its money for bigger debt and then the property comes > 20 years later.

Its a feature of an inefficient market, like there are other examples in many different markets. Nothing in life is ever black or white but you have your blinkers on and fail to fully appreciate the fact

If a gift is being given from parents it has a knock on effect to the rest of the transaction - namely a declaration that the monies are in fact a gift, and the parents/guardians/giver of money is not laying any claim to the property. (This would invalidate most applications for a mortgage).

It's the same principles as declarations regarding the family home protection act, which is relatively new in the whole scheme of things (came about in the late seventies).

The banks are moving with the requirements of the society and ensuring their docs reflect the transactions truthfully.

Barely Hedged

The_Morrigan wrote: »

If a gift is being given from parents it has a knock on effect to the rest of the transaction - namely a declaration that the monies are in fact a gift, and the parents/guardians/giver of money is not laying any claim to the property. (This would invalidate most applications for a mortgage).

It's the same principles as declarations regarding the family home protection act, which is relatively new in the whole scheme of things (came about in the late seventies).

The banks are moving with the requirements of the society and ensuring their docs reflect the transactions truthfully.

Im well aware of the reasons for declaring it but i found it mad that it was given its own sub section. Previously it was just put in "savings"

Lombardo86

lima wrote: »

Anyway I'm off to the other side of the world for a holiday so I bow out..

another thinly veiled i'm great post.


In my post i mentioned i had my house (after saving on my own) and moved into it. So i would have my house, handout or not.

Why would anyone then turn down a gift?

Thargor

This thread makes me feel a lot better about my own saving plans anyway...

Alf Veedersane

Barely Hedged wrote: »

Im well aware of the reasons for declaring it but i found it mad that it was given its own sub section. Previously it was just put in "savings"

It's not really savings that the applicant has put away coming out of their earnings so it makes sense not to include it as savings.

lima

lima wrote: »

Knowing that you 'made it' yourself is priceless, it's a goal of life for many to be in this situation

Personally I preferred being able to live a good lifestyle during my 20's (nearly 30 now) despite being in education for most of it and only on smallish money from a postgrand stipend and know I don't need to worry about a deposit (or certainly not the bulk of it) when the time comes. I know its a very lucky scenario when people can get gifted money but at the same time I don't see the money someone saves up themselves as being "superior" money.

I get the impression from this thread that some posters would like to see gifts banned or something. Such lunacy!

Eldarion

Sandra Chilly Numerically wrote: »

Personally I preferred being able to live a good lifestyle during my 20's (nearly 30 now) despite being in education for most of it and only on smallish money from a postgrand stipend and know I don't need to worry about a deposit (or certainly not the bulk of it) when the time comes.

I get the impression from this thread that some posters would like to see gifts banned or something. Such lunacy!

Maybe not banned but taxed for sure.

I definitely think it should be heavily weighted against mortgage applicants that they required a gift in lieu of saving for a deposit. It speaks volumes about their fiscal responsibility and therefore is a huge reflection on their credit worthiness.

I know the banks enabled them but people leveraging themselves up to their eyeballs with 100-110% mortgages that caused the bubble and eventual collapse should really at least acknowledge their role in it.

Gifting in lieu of a deposit is very much in a similar vein. Instead of the bank gifting them in the form of 0% deposit required, banks of M&D are gifting the 10-20% instead. It has the same effect, just not to the same scale of course.

starlit

I think if you can save and build that over time whether or not you get hand outs and getting an income it shouldn't matter. Put a deposit on what you can afford.

I've been saving since college and while in paying employment I made sure I saved. In the past few years I just spend on what I need. Even at that since I am not in paid employment at the moment I cannot afford to put a deposit on a house if I were to buy at all! For me its a waste of time as I am likely to move between job/places. Its too much hassle trying to let a place out!

whippet

Eldarion wrote: »

Maybe not banned but taxed for sure.

It is up to the lender to decide if the borrower is capable of paying back the loan and they will factor in the applicants ability to get a deposit together ..
rather than using taxation as a policy generator.


Gifts are taxed, with a decent exemption for the first 200k or so between parents and children. Are you saying that there shouldn’t be any allowance for just specifically for gifts being spent on property?



I personally believe in the standing on your own two feet mentality of buying property .. But why should you be penalised because your parents happened to do well for them selves, isn’t that the whole idea of building a pool of wealth to help the next generation.

I have two young kids and my main purpose in life now is to ensure that they will have the best start in their lives as possible from all angles and if my accumulated wealth in a couple of decades time can help them on that road I resent the notion that they should be taxed on the totality of the help.

Where do you draw the line .. If I choose to spend 20k a year on their second level education is that treated as a gift and should it be taxed? If I send them to Harvard .. Is that a gift and should it be taxed?

CarpeDiem85

I think most banks will count gifts against you now though. My friend had a huge deposit but a poor savings record. When she went to apply for a mortgage, they made her and her partner save the mortgage repayments for 9 months to see if they could do it. She lived at home so maybe that's why the bank made her do it. I thought this was normal?

Eldarion

whippet wrote: »

It is up to the lender to decide if the borrower is capable of paying back the loan and they will factor in the applicants ability to get a deposit together ..
rather than using taxation as a policy generator.


Gifts are taxed, with a decent exemption for the first 200k or so between parents and children. Are you saying that there shouldn’t be any allowance for just specifically for gifts being spent on property?



I personally believe in the standing on your own two feet mentality of buying property .. But why should you be penalised because your parents happened to do well for them selves, isn’t that the whole idea of building a pool of wealth to help the next generation.

I have two young kids and my main purpose in life now is to ensure that they will have the best start in their lives as possible from all angles and if my accumulated wealth in a couple of decades time can help them on that road I resent the notion that they should be taxed on the totality of the help.

Where do you draw the line .. If I choose to spend 20k a year on their second level education is that treated as a gift and should it be taxed? If I send them to Harvard .. Is that a gift and should it be taxed?

Tangibles versus intangibles. All capital gains are taxed. The way you use "should" is odd here, yet you explicitly call out gifting between parents and offspring as an exemption to a tax that is already in place.

I imagine you're argument is defending this exemption rather than whether or not the tax should exist?

My argument isn't about parents helping their children, it's more about the negative impact non cash and non credit worthy purchasers have on our property market.

MouseTail

Eldarion, I think you are confusing capital gains tax with capital acquisitions tax.

leanonme

Barely Hedged wrote: »

I looked at a mortgage application form recently and it had in the list of savings contributing to a mortgage - "money from other sources". Not investments, secondary income etc. An entirely separate section with the implication being that it was money gifted from parents.

Its a bit of a mad situation where one of the biggest banks in the country normalises the behaviour of parents gifting cash by placing it in its own sub section on the mortgage application.

As far as I'm aware no bank will accept the whole deposit as a gift. I had to prove a continues record of savings over a number of months. It also is a funny system as my partner cant go on the morgage application for medical reasons as he currently get insurance, so he can not appear to be contributing to the savings in any way, so we have had to pass off the final section of the deposit as a gift from my father.

Barely Hedged

leanonme wrote: »

As far as I'm aware no bank will accept the whole deposit as a gift. I had to prove a continues record of savings over a number of months. It also is a funny system as my partner cant go on the morgage application for medical reasons as he currently get insurance, so he can not appear to be contributing to the savings in any way, so we have had to pass off the final section of the deposit as a gift from my father.

Never said that it was

Bootros Bootros

The banks will take the deposit but also take savings into account. Those of you not saving a penny, living at home might want to think about why banks would trust you to be both able to start to pay 1k+ a month, and utilities plus any future hikes if you haven't saved in your life.

Eldarion

Eldarion wrote: »

Maybe not banned but taxed for sure.

Don't even get me started on the abomination that is CAT...paying tax on money which as already been taxed multiple times. Gifts are already heavily taxed, the only situation with a half reasonable exemption is between parents and children.

Eldarion wrote: »

I definitely think it should be heavily weighted against mortgage applicants that they required a gift in lieu of saving for a deposit. It speaks volumes about their fiscal responsibility and therefore is a huge reflection on their credit worthiness.

I think that would be a silly policy, fair enough that a person would need to have maybe 6 months to a year of a saving record prior to application but the fact that the bulk of a deposit comes from a gift shouldn't be an issue. Also Id image a bank would far rather a person with a bigger deposit (thus lower mortgage) which was got my gift rather than a person scraping the minimum deposit together.

Eldarion wrote: »

I know the banks enabled them but people leveraging themselves up to their eyeballs with 100-110% mortgages that caused the bubble and eventual collapse should really at least acknowledge their role in it.

Gifting in lieu of a deposit is very much in a similar vein. Instead of the bank gifting them in the form of 0% deposit required, banks of M&D are gifting the 10-20% instead. It has the same effect, just not to the same scale of course.

There is no comparison at all really. People getting 110% mortgages with massive repayments and defaulting on them is very different to someone coming in with a good sized deposit as a gift thus resulting in reasonable repayments.

Eldarion wrote: »

My argument isn't about parents helping their children, it's more about the negative impact non cash and non credit worthy purchasers have on our property market.

I don't think it's fair to call a person who hasn't saved their deposit as non credit worthy. Never missing a rent payment, credit card payment, insurance payment, utility bill, car loan payment etc etc demonstrates you are able to handle money. As I said above fair enough to save in the lead up to an application, I started saving a bit as soon as I was on proper money with having a track record in mind.

Bootros Bootros

Sandra Chilly Numerically wrote: »

Don't even get me started on the abomination that is CAT...paying tax on money which as already been taxed multiple times. Gifts are already heavily taxed, the only situation with a half reasonable exemption is between parents and children.



I think that would be a silly policy, fair enough that a person would need to have maybe 6 months to a year of a saving record prior to application but the fact that the bulk of a deposit comes from a gift shouldn't be an issue. Also Id image a bank would far rather a person with a bigger deposit (thus lower mortgage) which was got my gift rather than a person scraping the minimum deposit together.



There is no comparison at all really. People getting 110% mortgages with massive repayments and defaulting on them is very different to someone coming in with a good sized deposit as a gift thus resulting in reasonable repayments.



I don't think it's fair to call a person who hasn't saved their deposit as non credit worthy. Never missing a rent payment, credit card payment, insurance payment, utility bill, car loan payment etc etc demonstrates you are able to handle money. As I said above fair enough to save in the lead up to an application, I started saving a bit as soon as I was on proper money with having a track record in mind.

If you are paying rent which is equal to the mortgage stress test and are also paying utilities then maybe.

The stats show quite clearly that the people who got 100% mortgages were the most likely to default.

there isn't much difference in the risk profile between a 100% mortgage and an 80% mortgage where 20% is a gift. In both cases no savings.

Bootros Bootros

And remember - interest rates are still low.

leanonme

Bootros Bootros wrote: »

If you are paying rent which is equal to the mortgage stress test and are also paying utilities then maybe.

The stats show quite clearly that the people who got 100% mortgages were the most likely to default.

there isn't much difference in the risk profile between a 100% mortgage and an 80% mortgage where 20% is a gift. In both cases no savings.

But people must show a continues consistent level of savings, no bank is going to get a loan for 90 percent of the value and the other 10 percent as a gift, the bank will want to see consistent savings. As I am living at home I had to show a level of savings on a monthly basis that would be more than a mortgage repayment.

Woshy

We were given a cash gift by my parents - "early inheritance" as my Dad called it. We had nearly enough for a deposit saved ourselves too though.

All the banks wanted to see a consistent history of saving when we applied for mortgages and we were asked questions on any months that were missed etc. The cash we had didn't really seem to make any difference to the amount we were offered or how they judged us on our ability to repay etc. The only thing it did help with is that we got a slightly lower interest rate.

So even if someone is given the full amount of a deposit by their parents or other family members that doesn't mean that the bank will be willing to give them a mortgage, without evidence of saving and other fiscal responsibility. Anybody who thinks otherwise, that they can be given money and then get a massive mortgage for the rest would be in for a bit of a shock.

Bootros Bootros

Bootros Bootros wrote: »

If you are paying rent which is equal to the mortgage stress test and are also paying utilities then maybe.

My own rent is only ever been in house shares so not on mortgage repayment level but on the other hand I don't intend on going in with only a 20% deposit either when the time comes. I will also have a saving record, how long will depend on how soon I go down the buying route.

Bootros Bootros wrote: »

there isn't much difference in the risk profile between a 100% mortgage and an 80% mortgage where 20% is a gift. In both cases no savings.

There would be a big difference in the monthly repayment though which makes a considerable difference in the long run.

Also there are reasons people don't have saving such as being in education etc, and then enter well paying jobs after.

Bootros Bootros wrote: »

And remember - interest rates are still low.

And there is no sign of that changing for the foreseeable future.

Bootros Bootros

Sandra Chilly Numerically wrote: »

My own rent is only ever been in house shares so not on mortgage repayment level but on the other hand I don't intend on going in with only a 20% deposit either when the time comes. I will also have a saving record, how long will depend on how soon I go down the buying route.



There would be a big difference in the monthly repayment though which makes a considerable difference in the long run.

Also there are reasons people don't have saving such as being in education etc, and then enter well paying jobs after.



And there is no sign of that changing for the foreseeable future.

Where foreseeable is a 30 year mortgage. Look back 30 years. Also interest rates are inflation interdependent. If you believe that interest rates will stay low then the debt repayments will stay high as inflation won't eat into them.

The thing about 100% mortgages is that very few people would decline one if available. Think back to the boom. Woukd you get a 400k mortgage with 0 down or put down 80k? Very few did the latter. In fact the prices depended on 100% mortgage.

If everything else is equal the saved 20% is vastly more an indication of an ability to pay than an inherited 20%.

Of course an inherited 50% is going to compensate for an earned 20%. But an inherited 20% shouldn't.