Purchasing from family members

superbuzz3

My nan unfortunately passed away two months ago, and her bungalow was left to her three children (My 2 Aunties and my dad). The house is stuill going through probate, which is due to finish in 6 weeks, and me and my partner have made an offer on the house to my dad and aunties.
We have offered £225000, which is the going rate based on the estate agents estimates, and we have secured a mortgage for £175000. This leaves £50000 needed as a deposit.

My question is, as my dad and his 2 sisters are all due £75000 each, the plan was for my dad to "lend" me the £50000 as a deposit and only get £25000 fromn the house sale and my aunties get their full share.

My question is, does this deposit have to be hard cash, or can my dad leave us the £50000 as equity in the house? As this is a private sale, then we just get the solicitors to draw up that we repay him once we re-mortgage.

I have heard that a second charge should be taken out on the property in my dads name, but how does that work, and how much does it cost?

Thanks for any help you can offer

silvercar

Let your solicitor sort it all out. You take out the mortgage, the solicitor then draws down the money from the mortgage and makes payments to your aunts from the mortgage money and to your dad for the lesser amount.

Your solicitor can then put a second charge on the property to protect your dad's interest.

You will have to declare to the lender that the deposit is coming from a family member that is the seller of the property. Be careful with this as some lenders are not happy with vendor gifted deposits. As it is a genuine deposit gift (as opposed to a builder inflating the price to create a deposit) you should be able to sort it, but a broker will know how to present it and which lenders will accept it.

Conrad

The lender may not allow this. For one thing, lenders now want proof of deposit in most instances and where deposit is gifted the giftor is usualy required to waive any rights to the money.

The way I would normaly approach this is with a Deed of gift, but not all lenders allow this. Halifax is one that can consider them though. The reason lenders aren't kken on second charges to cover deposits, is that very deposit is the lenders cushion should you be repossessed. It may be needed to cover mortgage arrears, court costs, balifs, lock smiths, boarding windows, and often in the case of repos a complete rennovation as bitter people may wreck the joint.

Conrad

Also, I'ved just noticed you say you could repay him when you remortgage, but that assumes you will get a high LTV remo in these difficult times. Such a high ltv (anough to repay your'e dad) will be at higher interest rates circa 6% (and remember rates will go up within the next few years) for most people needing typical income multiples.