Deposit for Mortgage Question

marlasinger

We have recently had an offer accepted on a house, and are about to start the formal application process.

In terms of deposit, we have £11K in cash, and about £19K in shares on the Australian stock market. As the market has just recently dipped, my parents have suggested that instead of selling my shares, they loan me the amount needed for the deposit (the £19K), and then when share prices rise again, I sell them and pay them back.

But I'm just a bit concerned of how this would look to a lender. Would I be better off just selling the shares now, and using the cash as a deposit (though I may then need to borrow £2K off my parents in order to have 25% deposit)?

Also, can I just show my Holding Statement (for Shares) as proof of deposit at the time of the mortgage application, or do I need to have the deposit as cleared funds - even though exchange would be many weeks away?

Any advice appreciated.

Blue_Horizon

Either way, you will need to disclose the source of funds for money laundering purposes. I'm not sure whether the loan needs to be formalised or whether it's seen as a gift.

Yorkie1

It's absolutely fine in principle for part of your deposit to come from your parents but as BH says, it must be declared.

My parents contributed towards my mortgage deposit. We have agreed that they will be repaid in a certain way, but in view of the informal and unenforceable nature of the agreement between us, it was described as a gift on the mortgage application - and my parents wrote a letter to confirm the amount and that it was a gift.

If it's declared as a loan then it affects mortgage affordability and may have other impact that I'm unaware of.

property.advert

What ? mom and pop go on the internet and transfer the cash to your bank. You transfer it to your solicitor. No need to tell anyone anything. As far as anyone is concerned, the money could have come from anywhere but it is already within the banking system.

I don't think you have to go into the n'th degree about where the deposit is coming from. Savings should suffice and covers any amount of savings methods, including shares.

If you are required to show the deposit when making the mortgage application, then I would have it either on the money market earning interest or in a deposit account in your name. Leave mom and pop and the shares out of this.

marlasinger

property.advert, it sounds like I can't leave my folks out of it, if I have to declare that they are loaning me money for part of the deposit. :huh:

I'll just be honest when the question is asked, and my parents have just said that they would be happy to sign a declaration explaining the situation, if need be.

I was just a bit concerned that seeing a lump sum come into my account would raise a few eyebrows.

property.advert

Go back and think logically why you need to bring your parents into this in the first place. I would never go blabbing to my bank manager if my father shoehorned 5k into my pocket just the same as I would not tell him if I gave my mother 5k for a birthday present.

Why on earth do you seem hell bent on bending over whilst they shaft you ? At the moment they know nothing, so leave it that way.

They don't know you didn't sell the Porsche or sell the shares or hit lucky on roulette. All totally legal explanations (and a million others) of where the money came from.

They only really care for a couple of reasons. Firstly, if you have borrowed it then they presume you will have to pay it back and their credit scoring of you does not show this large loan on the books. Secondly, and in an ideal world, they want to see that you have saved the money rather than had it gifted.

The fact is that you have shares which you have sold and that is the end of it. They do not need to know more or to whom you sold the shares nor what colour underwear you have on. The money is within the banking system, it is legitimate and it is a proven deposit, not a discount from the vendor.

I suggest you get all the forms and read through them, seeing exactly what they would need but that you then grow a set / grow up a bit and put down what they need to know, not necessarily what they would like to know.

I cannot even begin to believe that you are considering telling them all this, I honestly cannot.

Raggs_2

Declare it as a gift from them. If the mortgage company get shirty about it (from the sounds of other posts here it really isn't an issue), then just sell the shares and be done with it.

property.advert

Raggs wrote: »

Declare it as a gift from them. If the mortgage company get shirty about it (from the sounds of other posts here it really isn't an issue), then just sell the shares and be done with it.

What terrible advice. Why on earth would you want to open a can of worms when there is not need ?

marlasinger

Blimey, take a chill pill, property.advert.

The reason I am questioning what to tell them, is that I thought they would need to see some kind of evidence that the shares have been sold, or that it is a gift/loan/whatever. I thought that if a lump sum appears in your bank account, then you have to provide verifiable details of where it came from. Hence, several posts on here where borrowers have been required to provide a declaration from their folks/friends, saying their deposit is a gift, etc. Now why would they need to provide that information, unless the lender needs to see where the deposit comes from?

Oh, and if you re-read my original post, I won't be selling my shares. That is the issue. If I was selling my shares and using the funds as a deposit, then I wouldn't even be asking the question. Duh!

property.advert

There you are, worrying yourself sick because you are scared of doing what most sensible people can see straight away. Not to worry, you tell them and then they can reassess your risk and hit you with a higher interest rate. But you can sleep easy at night, safe in the knowledge that the police, Gestapo, the three horsemen of the apocalypse and little Lord Fauntleroy won't come a knocking at your gingerbread house

beecher2

property.advert wrote: »

There you are, worrying yourself sick because you are scared of doing what most sensible people can see straight away. Not to worry, you tell them and then they can reassess your risk and hit you with a higher interest rate. But you can sleep easy at night, safe in the knowledge that the police, Gestapo, the three horsemen of the apocalypse and little Lord Fauntleroy won't come a knocking at your gingerbread house

What an odd post. The OP wants to do the right thing, and is seeking advice on it. They are hardly worrying themselves sick/scared/unable to sleep.

OP - declare it as a gift if your parents are happy with this. No need to mention the fact that you'll be paying your parents back in the future, or mention the shares.