Family bridging loans

gwapenut

I want to buy a new house and sell an old house.

My multiples and deposit are fine for the new house, however the old house, which I am selling, has an outstanding mortgage of 40K.

I don't want to NEED to sell the old house before buying the new, however the amount of mortgage I am allowed doesn't leave me enough headroom for the old mortgage.

My dad could lend the money but I believe that being lent money by family members also counts against how much mrotgage I could have? Bear in mind this is just a short term birdging loan ... Equally, could my dad pay off the old house mortgage instead, so that he had no involvement in the new house finances at all? Effectively it could be as if he'd just bought into the old hpouse prior to sale, but of course there'd be no legal paperwork for that.

Wondered if there were any ways round it for this short term loan? It's only for the case where the sale falls through, don't want to lose the new one.

G_M

I don't see any reason why your dad shouldn't pay off your old mortgage. You then buy the new house with your existing savings and a new mortgage, and when the old house is sold you pay your dad back.

gwapenut

Thanks. Does this kind of thing need to be done as a gift, or cna family members loan money for mortgages without it being fraud etc?

G_M

gwapenut wrote: »

Thanks. Does this kind of thing need to be done as a gift, or cna family members loan money for mortgages without it being fraud etc?

Where's the fraud? Who is lying to who in order to get the money? Dad is paying off the 1st mortgage , so lender will be happy. Maybe 2nd lender will ask about debts/loans but since you have equity in the 1st house I don't see a problem.

It can be a gift, in which case it doesn't need to be re-paid, or a loan, in which case it does.

The agreement can be a totally informal verbal agreement (assuming all parties trust each other!) or a more formal written agreement which may/may not specify period of loan, any interest to be paid, responsibility for legal fees if it goes sour etc etc

Only thing to watch out for is the 7 year rule re inheritance tax on a gift if dad dies, but this doesn't seem to apply to your circumstances.

gwapenut

G_M wrote: »

Where's the fraud? Who is lying to who in order to get the money? Dad is paying off the 1st mortgage , so lender will be happy. Maybe 2nd lender will ask about debts/loans but since you have equity in the 1st house I don't see a problem.

It can be a gift, in which case it doesn't need to be re-paid, or a loan, in which case it does.

The agreement can be a totally informal verbal agreement (assuming all parties trust each other!) or a more formal written agreement which may/may not specify period of loan, any interest to be paid, responsibility for legal fees if it goes sour etc etc

Only thing to watch out for is the 7 year rule re inheritance tax on a gift if dad dies, but this doesn't seem to apply to your circumstances.

Agree can't see that it breaches anything especially as my dad's involvement is (a) In a completely different property and (b) On ne which will no longer have a mortgage and therefore no interested mortgager there either.

It would be a simple loan, but repayable when the house is sold & more equity released - so should not even be relevant to my new mortgage lender in terms of affordability either, as there will be no ongoing oan repayments - just one big final one when house sold an equity released.