Loan from Parents and FTB Questions

Son_of_a_beesting

Hi MoneySavingExpert Forums

Been reading the forums for a while but signed up today to get some help please.

My situation is I am 29 and married. We live in the South East (Maidenhead, near Slough/Reading) and I work in London while my wife is a store manager for the Maidenhead branch of an international retail chain. My wife is Spanish and has lived in the Uk for about 7 years and has been on the electoral register for about 2 years.

We got married 3 years ago and rented as we were unsure if we would relocate etc.

We have decided to start a family and my parents have offered to give us a deposit for a place of our own. We have around £6k saved and earn over £3k after taxes each month. We have no loans out (we have had one before for a car which we have paid off over the course of a year), one credit card between us which is paid off in full every month. No CCJ etc. We are looking at about 75-80% LTV and a monthly mortgage payment of about £1000 a month (which is about the same as we pay rent).

Is the fact we have a gifted deposit going to stop us getting a mortgage? I will pay my parents back as this will be their money in my eyes.

The two ways we discussed was remortgaging their home (which they own in full no mortgage) which is worth about £290k or they can give us their savings. I would prefer the remorgage because that still leaves their saving in case of emergency.

What are peoples thoughts on this? Would we stand a good chance of getting a mortgage? What about the gifted deposit which I view more as a loan which I want to pay back.

Thanks

VIGILANT22

You are misunderstanding gifted deposit from the other thread you've been on this morning....

Ask your friends/family/colleagues to refer you to a whole of market mortgage adviser they have used and been happy with

They will go through your circumstances and discuss options, ensure they explain whole process..If something you're unsure of ask for more explanations...it is a minefield out there...as you can see from reading some of these posts....people dont gain enough information before making commitments. This will probably be your biggest financial commitment, therefore treat it like that..ie.If your electrics are broke you call the electrician etc

Son_of_a_beesting

Hi

Thank you for your response. I have already spoken a colleague at work who recommended one to me and I will do that. My purpose in asking the question was to get a greater base understanding. I use forums like this to get a good grounding of knowledge. I will them move onto a specialist who I can get into a more detail with.

The more I understand now the more help a IFA will be I think. It will also help to direct my questions and my thinking to which course is most appropriate.

I fully understand the gravity of a mortgage and will make sure I go into any agreement with my eyes fully open.

Thank you again

VIGILANT22

use both...this is for information & an adviser is for advice...good luck

g_attrill

A "gifted deposit" is usually the term used by housebuilders where they "give" you (say) 5% of the property's price to use as a deposit on a mortgage. Because they immediately get it back it is really just discounting the price by 5% but artificially inflates the sale price in the Land Regsitry records. For that reason, some (many?) mortgage companies don't regard it as a true deposit.

Anyway, in your case it isn't relevant. What will happen is that when you apply for a mortgage they will ask about the source of the deposit - the problem is that if it is a loan the lender will want to know how/when it is being paid back, because that will affect the affordability of the mortgage. If it was a straight gift the lender might want a letter from the parents saying they it is a gift and they disclaim any interests in the house.

Son_of_a_beesting

AAHHHHH. That makes sense!

OK so that helps, thanks g_attrill

The way I want to work it is I want my total outgoings for the mortgage to be around £1k (give or take £100). So that would be made up of paying back my parents and the mortgage itself.

I know they will take into account the monthly outgoings and this will have an effect on my loan amount but as the loan amount would be decreased by the deposit that will limit the exposure of the mortgage lender.

Mini_Bear

bare in mind that if your parents remortgage there will be additional fees as well as the interest to pay on their new mortgage! it will cost a lot more than using cash savings!

Son_of_a_beesting

Yep I am aware of that but I would rather not leave my parents without savings and this way there is an internal safety net between us.

We have had very open and honest discussions (including death etc) about all repercussions/eventualities and if it was to go ahead we would put everything in writing.

I have one question, my parents would sign a letter giving up any right to the house. Even though it is a loan would that help a mortgage lender look more favorably on the situation?

Thanks for the helpful replies so far.

TrickyDicky

If you bring in £3k after tax, with £1k on rent, how do you only have £6k savings? lenders will look at this as you obviously do something with the spare £2k each month (ok, 500-1k is probably bills and food, but that still leaves around a grand a month you could be saving).

Son_of_a_beesting

We did save, but we currently spend time seeing family in Spain, had a big trip to Australia to see friends as we thought this would have been the only time we could have done it before their children grew up.

Yes maybe we could have saved more and we had more but then the car needed repairs etc and recently had my sister in law wedding which we spent a bit of money on so that hit things a bit.

We currently are saving between £600-£800 a month. Saving is not an issue and we would still be saving.

We had also thought buying was not possible and decided to enjoy things a bit too much and it was not until we had a conversation with my parents that we thought it was a possibility. If it does appear that we can get a mortgage we can bump up the savings to closer to £1k a month.

Would this have a massive negative impact on our chances to get a mortgage?