Deposit query

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fiftrix

Registered User
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Hi there,

I have a hypothetical question for you all. Is it possible to borrow the deposit you need from someone then give it back once the mortgage has been approved?

Just say I saw a house that needed some work. I could buy it for €50k and it needs maybe another €50k - €70k worth of work. So I potentially need €120k but could do it for €100k. Could I get someone to put €20k in my bank account as a deposit and once I get the €100k mortgage, give them their €20k back?

There's a lovely little house going to be coming up for sale soon near where I live and I'd love to buy it, but I don't have time to save the deposit needed which is why I'm querying the above.

Any advice gratefully received....
 
Technically you could meet the deposit criteria. Bank would need a letter saying it's a gift that doesn't need to be repaid.
But, how would you be able to evidence affordability if you've missed savings?
Also, you wouldn't get the full mortgage straight away in your case. They'd lend you enough to buy the house, and then stage payments as you complete renovation. You'd really need some savings to undertake something like this.
 
Thanks for the reply. I do have evidence of savings. I have saved about €5k over the last few months. Also, I have a mortgage already and I've never missed a payment in 10 years. I have been told I would be eligible for a second mortgage as I'm renting my current house out for around €300 more than the repayments at the moment, but I'd have to have the 8% deposit.

My mam told me she'd give me the money to put into my account but only under the condition that I give it back to her in a couple of months.....

Good to know it is technically possible though as it would take me months, years to get close to the amount I need for the deposit.
 
fiftrix said:
Also, I have a mortgage already and I've never missed a payment in 10 years. I have been told I would be eligible for a second mortgage as I'm renting my current house out for around €300 more than the repayments at the moment,
Click to expand...

If this house is in positive equity, then sell it to get the deposit.

If it has a tracker, you may be able to move it to the new property , subject to an increased margin of 1%.

Brendan
 
It's in negative equity or I would have sold it ages ago, believe me. I don't want to be a landlord.

I have a variable rate mortgage.
 
fiftrix said:
Hi there,

I have a hypothetical question for you all. Is it possible to borrow the deposit you need from someone then give it back once the mortgage has been approved?

Just say I saw a house that needed some work. I could buy it for €50k and it needs maybe another €50k - €70k worth of work. So I potentially need €120k but could do it for €100k. Could I get someone to put €20k in my bank account as a deposit and once I get the €100k mortgage, give them their €20k back?

There's a lovely little house going to be coming up for sale soon near where I live and I'd love to buy it, but I don't have time to save the deposit needed which is why I'm querying the above.

Any advice gratefully received....
Click to expand...
Short answer: no. The maximum mortgage for purchasing the house would be 80% of €50k, i.e. €40k. That means you would need to put €10k of cash into it. The bank may also agree to fund 80% of the cost of the renovations, but the other 20% must be paid by you, i.e. a mortgage of €80k and a cash input of €20k. As RedOnion said, the €20k would need to be a gift, as the banks don't allow applicants to borrow any part of the deposit. You may be able to get approved for a 90% mortgage, if you find a bank that still has exceptions to the 20% deposit rule available.

Another likely issue here is that the banks have minimum cost per square foot guidelines for renovations. While someone might manage to bring a project in under budget, the lender won't take their word for it, so you would need to be approved for enough to pay standard market rates for the works, plus 10-15% contingency for cost over-runs. Also, if the works are structural, you would need to engage an architect and/or an engineer, and to get a certificate of compliance with building regulations on completion.

Best regards,
Dave Curry (broker)
https://www.linkedin.com/in/davecurryirl
 
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