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.

D3PO

Thoie wrote: »

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

.

The OP's suggestion is to not tell the bank / broket / solicitor of this loan thats the fraudulent part.

If the OP were to tell the bank / broker / solicitor of this loan they would not get the mortgage.

downwithit

D3PO wrote: »

The OP's suggestion is to not tell the bank / broket / solicitor of this loan thats the fraudulent part.

If the OP were to tell the bank / broker / solicitor of this loan they would not get the mortgage.

I will most definitely be telling them. I just asked do they need to see the transaction happen. From the start I have said that I will be paying the 10% direct to the seller. All parties (banks solicitors etc) will be aware of this

caew

I am going through the mortgage application process at the moment and you would not believe the questions the bank is coming back with. They are two weeks now asking us questions, down to individual transactions on our account statements.

If you do go for it be ready to be questioned upside down and inside out on your financial situation.

I think speaking to a broker is a good idea. They will be able to advise exactly what you need to do and if your idea is viable.

I am not legally qualified and I have no idea if it is legal or not. But you might as well find out and I hope it works out for you. Sometimes you have to think outside the box to get what you want!

murphaph

D3PO wrote: »

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.

Yup. Why haven't you been saving yourself is the real issue here OP. You must both have better than average salaries, so why don't you have that 30k saved yourself already? (this is something you need to ask yourselves, not just let the bank ask).

johnnyskeleton

downwithit wrote: »

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

Well, to continue the analogy, if this thread were about avoiding Garda speed vans then it would be promptly shut, so if you are looking for advice on how to get away with fraud you won't get it here.

downwithit

murphaph wrote: »

Yup. Why haven't you been saving yourself is the real issue here OP. You must both have better than average salaries, so why don't you have that 30k saved yourself already? (this is something you need to ask yourselves, not just let the bank ask).

I know, I know, I cant answer that question. We should have, but were living it up a little while we were young, and didn't think this day would come around so quick. Sure isn't that always the case you think you will be young forever then you realise you need to do things like settle down get a house, maybe have kids get married etc

downwithit

johnnyskeleton wrote: »

Well, to continue the analogy, if this thread were about avoiding Garda speed vans then it would be promptly shut, so if you are looking for advice on how to get away with fraud you won't get it here.

If my solicitor, bank, broker for one minute feel it is fraud. I will walk away from it. Whats that they say evasion versus avoidance

johnnyskeleton

downwithit wrote: »

Its only fair that they are paid market value, I would not expect to sell it to me less than that.

downwithit wrote: »

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.

Your story simply does not make sense.

downwithit

downwithit wrote: »

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

I think I answered that here.

D3PO

downwithit wrote: »

I will most definitely be telling them. I just asked do they need to see the transaction happen. From the start I have said that I will be paying the 10% direct to the seller. All parties (banks solicitors etc) will be aware of this

The point is you will not be telilng them the full facts. Telling them the 10% will be paid directly to the seller isnt the full facts.

Unless you are telling them that the 10% will be paid back as a loan to the seller over a period of time your not making them aware of the situation.

Obtaining money by deception would be the legal definition of what you have proposed.

downwithit

D3PO wrote: »

The point is you will not be telilng them the full facts. Telling them the 10% will be paid directly to the seller isnt the full facts.

Unless you are telling them that the 10% will be paid back as a loan to the seller over a period of time your not making them aware of the situation.

Obtaining money by deception would be the legal definition of what you have proposed.

Ah sure what can you do, only give it a shot

whippet

The banks will go through your bank statements line by line (I know I went through this in the recent past) .. and they will pick out individual transactions and ask you what they were for. For instance there was a laser card transaction on my statement for a Michelin starred restaurant and the girl in the bank asked what that was for. I told her it was an anniversary dinner .. she circled the transaction in red and wrote 'Anniversary Dinner - once off' .. this would be the copy that the underwriter would get.

The other thing; banks tend not to include - Gifts, Commission, Bonuses, inheritance etc in to account when calculating the amount they will lend. They really want to see the ability to put away the deposit as regular saving, showing a level of financial prudence and responsilitity ... from what you have been saying that you 'should' have been saving .. this will go down like a lead ballon with the bank - it shows an inability to financially plan and will probably suggest going away for a year and coming back with the savings record and applying again.

I know its not what you want to hear .. but the bank's lending practices are 180 degrees from what they were a decade ago !!! .. and rightly so

Thoie

D3PO wrote: »

The point is you will not be telilng them the full facts. Telling them the 10% will be paid directly to the seller isnt the full facts.

Unless you are telling them that the 10% will be paid back as a loan to the seller over a period of time your not making them aware of the situation.

Obtaining money by deception would be the legal definition of what you have proposed.

I didn't realise that's what he was doing. I thought a third party was lending you the deposit in the short term.

The solicitors (all of them) are extremely unlikely to finish the conveyancing until all monies are paid. Your solicitor won't close until you've paid everything, as that's the only way you can get good title.
The seller's solicitor won't close until she's got all the money, as otherwise she'd be leaving her client open to not getting paid fully.
The bank won't let you draw down the mortgage until all the arrangements are in place with the solicitors (or they could end up out of pocket).

downwithit

Thoie wrote: »

I didn't realise that's what he was doing. I thought a third party was lending you the deposit in the short term.

The solicitors (all of them) are extremely unlikely to finish the conveyancing until all monies are paid. Your solicitor won't close until you've paid everything, as that's the only way you can get good title.
The seller's solicitor won't close until she's got all the money, as otherwise she'd be leaving her client open to not getting paid fully.
The bank won't let you draw down the mortgage until all the arrangements are in place with the solicitors (or they could end up out of pocket).

Just to clear things up. I am due a payment of €38,000 but it will come through in about 12 months.

I am looking to buy a house off a relative now. Sale price agreed at €300,000 (market value). I do not have the full deposit together. I want to pay 10% deposit from me to the seller (as I don't have it just yet my brother would give me this €30,00 and I pay him back interest free when my €38,000 comes through. The 90% loan of €270,000 would come from a bank in the form of a mortgage.

Seller gets full €300,000, banks loan on 90% of the property value. Solicitors are free to close on sale as all finance cleared.

I do not see any of this as deception just family helping each other out.

D3PO

downwithit wrote: »

Just to clear things up. I am due a payment of €38,000 but it will come through in about 12 months.

I am looking to buy a house off a relative now. Sale price agreed at €300,000 (market value). I do not have the full deposit together. I want to pay 10% deposit from me to the seller (as I don't have it just yet my brother would give me this €30,00 and I pay him back interest free when my €38,000 comes through. The 90% loan of €270,000 would come from a bank in the form of a mortgage.

Seller gets full €300,000, banks loan on 90% of the property value. Solicitors are free to close on sale as all finance cleared.

I do not see any of this as deception just family helping each other out.

You will be asked about where the 30k came from as part of the application process. If you state its a 30k loan from your brother then its not deception.

If you state its a 30k gift from your brother it is.

If you do the latter then it is fraudulent. Regardless of what arrangement you have and what way you can handle this repayment with your brother.

Thoie

downwithit wrote: »

Just to clear things up. I am due a payment of €38,000 but it will come through in about 12 months.

I am looking to buy a house off a relative now. Sale price agreed at €300,000 (market value). I do not have the full deposit together. I want to pay 10% deposit from me to the seller (as I don't have it just yet my brother would give me this €30,00 and I pay him back interest free when my €38,000 comes through. The 90% loan of €270,000 would come from a bank in the form of a mortgage.

Seller gets full €300,000, banks loan on 90% of the property value. Solicitors are free to close on sale as all finance cleared.

I do not see any of this as deception just family helping each other out.

So I was right the first time - the loan (for the deposit), is coming from a third party (your brother)? Sorted. He renounces any claim on the property, it should all be grand.

D3PO

Thoie wrote: »

So I was right the first time - the loan (for the deposit), is coming from a third party (your brother)? Sorted. He renounces any claim on the property, it should all be grand.

Grand except that the 30k loan will very seriously impact affordability calculations for the mortgage application to the point the OP is unlikely to get the amount needed.

The OP has also indicated he doesnt intend to describe the 30k as a loan but instead a gift which is not infact the case.

downwithit

D3PO wrote: »

You will be asked about where the 30k came from as part of the application process. If you state its a 30k loan from your brother then its not deception.

If you state its a 30k gift from your brother it is.

If you do the latter then it is fraudulent. Regardless of what arrangement you have and what way you can handle this repayment with your brother.

Why consider it deception?

Nobody looses out here.

Seller gets the market price for her house
Bank get a mortgage on a house with good equity
I get my house
My brother gets his money back

downwithit

D3PO wrote: »

Grand except that the 30k loan will very seriously impact affordability calculations for the mortgage application to the point the OP is unlikely to get the amount needed.

The OP has also indicated he doesnt intend to describe the 30k as a loan but instead a gift which is not infact the case.

Affordability of the mortgage does not come in to it. I am happy with the repayments of the €270k loan. I will not need to add repayment of the 30k deposit on top of this as it is coming in one lump in 12 months time and will not over stretch my monthly outgoings

caew

When I bought my first house my dad lent me 50k, he had to sign to say that it was a gift and he had no interest in the property.

In fact in was a loan, he was making an investment and I was paying him back plus interest. In total I paid him back 70k.

All the bank needed to know was that he was not going to stake any claim in the property. Which he was happy to declare/

Anything after that was a private matter between myself and himself, nothing to do with the bank. If I defaulted on my loan from him he would have had to sort that out with me and therefore he was taking a leap of faith that I wouldn't let him down.

I didn't, he got his money and I got my house and the bank got their mortgage paid.