New mortgage deposit loaned by father in law

M+KRobbo

Hey Guys

My wife and I were offered help to move to a larger house sooner by her father in the form of 60k loan for the deposit. Since finding a great house and having our offer accepted her father has been expressing some concerns and its now changing his mind and wanting to look at other options, which are more costly to both parties.

My wife is a self employed dentist and I own a sports nutrition company, both of us are lucky enough to be doing very well and earn well just haven't had the time to save for a deposit. But being self employed many lenders have been a bit nervous about offers but we have used a broker and managed to find one willing to lend but with certain criteria. The lender requires in writing from her father a letter stating the 60k deposit is a non refundable/returnable gift for us to get the offer and move forward. Her father is nervous about doing this as its actaully a loan which will be paying back in 2-3yr (well within our means even on top of mortgage payment) so by stating that its a gift and not he believes he is committing some form of fraud?.

He is now expressing concerns regarding some security for his money, obviously the lender will not allow him to have a charge on the property at the start, so one option we though was to complete the house purchase using the "gift" from her father then once completed and moved in we take out a separate solicitor agreement for her dad to have a second charge on property till our loan is paid back. I understand this can be questionable security for his money as this puts him behind the lender who will only be interested breaking even with its loan in the unlikely event we default on the mortgage before it paid back.

His main concern is that he wants this money back in time for his retirement in approx 5 yrs and although we are both very confident with our careers, have income protection plans in place, life cover etc etc he wants to know he'll get that money back should !!!! the fan in some way.

Does anyone have any ideas on what other options we could look at to make him feel secure about this loan. Personally I feel the only option is for him to trust us as I cant see lenders being very happy with second charges and we are more than capable of paying it back before his retirement.

M+K

beecher2

You would be committing mortgage fraud if you said this deposit was a gift when really it is a loan. You say the only option is for your father in law to trust you but this is a huge ask and lots can go wrong. What if you split up, lose your job, have triplets? You can't possibly know what will happen in the future and your f-i-l needs to know his retirement is safe. If it would take you 2 years to pay back the 60k, save it up yourself instead - seems to me this is the obvious other option.

josievg

Yes, he would be committing fraud if he lies as would you on your mortgage application.

What if something does go awry with your plans? What if you are unable to pay him back in time for his retirement?

Personally I wouldn't consider risking a parent's retirement fund.

I think you should save the deposit instead and delay your plans.

property.advert

It is reality versus the legal position isn't it ? If structured one way then the lender doesn't give a toss but structure it another way and there is no loan. To get the loan her father has to gift the money and privately you promise to repay him.

Either he trusts you or not. My guess is that he doesn't and perhaps rightly if you are doing so well but haven't "had time" to save a deposit of your own. Must have been too busy out spending your income then ?

Me ? if I really thought I could save £200k over 5 years then I'd feel fine to get him his £60k back and I'd complete on the loan and you know what, unless it goes tits up, no-one will ever know anything about it.

M+KRobbo

Personally I totally agree,

Im not one for lending money off anyone especially family and how complicated things can get that. My business lendings are minimal and if i cant afford it I don't do it and just nuckle down and save.

It was on the in-laws encouragement my wife started to look at houses as they wanted to help us out and climb the ladder faster, whereas im happy to live as we are till our savings reach certain level to afford the type of house Ive just agreed to look at all options with them.

Thanks for the replies!

M+KRobbo

property.advert wrote: »

It is reality versus the legal position isn't it ? If structured one way then the lender doesn't give a toss but structure it another way and there is no loan. To get the loan her father has to gift the money and privately you promise to repay him.

Either he trusts you or not. My guess is that he doesn't and perhaps rightly if you are doing so well but haven't "had time" to save a deposit of your own. Must have been too busy out spending your income then ?

Me ? if I really thought I could save £200k over 5 years then I'd feel fine to get him his £60k back and I'd complete on the loan and you know what, unless it goes tits up, no-one will ever know anything about it.

Thanks for the reply

trust is an issue i think given his recent concern, but not because we have been busy spending our money. A Wedding took some of our recent savings along with clearing all student loans we do have a nice lump now (we are only 26+27 yr). Just on encouragement from him my wife began looking a properties sooner than we had planned and found her "dream house"

themull1

She will find another dream house, save the deposit yourselves and look when you have the money, how would you feel if something happened and you couldnt give the £60,000 back?