Deposit source question

Phunky

I'm about to exchange on house which I will be putting down £20k as a deposit. Today my solicitor has asked how I was funding the deposit in which I told her I would be putting down 8k from my savings and 12k from my father.

I was then told that I would need my father to state that this was a gift and for my father to declare that this was not expected to be paid back to him, this to me seems wrong and my father also agreed.

What is the reason for my solicitor to ask for me to state that this was a gift? My father will only be lending me the 12k short term as I will be receiving a retention bonus at the end of June that will cover this loan but we are looking to exchange at the start of June, hence why he is lending me it.

We both don't feel comfortable doing what my solicitor has suggested, can anyone expand on why they have asked us to do this?

PaulLuke

They've asked you this question because, if you are expected to pay this money back to your father it's really just a loan (albeit it does not show up on your credit report) and from their point of view would affect the affordability of your mortgage.

Annisele

Sounds as though your solicitor has misunderstood (the other possibility is that your solicitor understands the situation perfectly and is OK with the idea of asking you to lie to your lender - in which case you need a new solicitor).

As PauLuke says, if your deposit is funded by a loan then that will affect affordability calculations - so the lender cares. You can't say that it's a gift, because it isn't one.

HappyMJ

If it's a loan to be paid back the mortgage lender needs to know that.

Phunky

The mortgage company does know, I told them that depending on the completion date part of the deposit maybe paid by my father to cover us until my bonus payment at the end of June.

It sounds like I'd be better reducing my deposit and then adding a extra payment at the end of the month.

What would have happened if I never told them about my father lending me part of the deposit and just showing them my bank statement with fthe full deposit in place?

The loan from my father is only short term (22 days) and I have docs from work stating when I will receive this bonus, as it's to keep me at the company after a previous acquisition and is paid out at set dates over 18 months.

betmunch

If the lender is aware and you have your mortgage offer then you dont need to say its a gift.

If it becomes a problem, why not delay the exchange and completion dates by 22 days so you have the money from work?

Conrad

No cause for concern at all, this is absolutley standard. People simply give the lawyer a letter stating the sum is a gift - the lawyer would have no idea whether the letter came from a family member or a random passing Goblin so it'a actualy pointless and meaningless in reality, they just need a letter to cover thier @@ss. People have had parental assistance since the dawn of time and 99.9% do not get repossessed and very often do pay thier folks back all in good time without the world comming to end.

Thrugelmir

Phunky wrote: »

I was then told that I would need my father to state that this was a gift and for my father to declare that this was not expected to be paid back to him, this to me seems wrong and my father also agreed.

If you would be in a position to repay the monies in a short time frame. Why the concern over merely drafting a letter? As you can repay the gift of your own free will.

InMyDreams

Annisele wrote: »

You can't say that it's a gift, because it isn't one.

I disagree. I would argue that it is a gift. It's a gift if you and he agree that there is no *legal* obligation to pay it pack. All writing this letter does is mean that the mortgage lender won't have to compete with your dad in the case of things going pear-shaped. If you can't afford any payment, it's your dad that does without and not them.

If you want to gift it back at some time in the future, that's up to you, but your dad can't hold you to it. If he trusts you and is happy to take the risk of things going financial wrong for you, there's no problem.

Phunky

betmunch wrote: »

If the lender is aware and you have your mortgage offer then you dont need to say its a gift.

If it becomes a problem, why not delay the exchange and completion dates by 22 days so you have the money from work?

We have to move out of our current house on the 8th June so it's not really ideal for us to delay for a month or so.

Conrad wrote: »

No cause for concern at all, this is absolutley standard. People simply give the lawyer a letter stating the sum is a gift - the lawyer would have no idea whether the letter came from a family member or a random passing Goblin so it'a actualy pointless and meaningless in reality, they just need a letter to cover thier @@ss. People have had parental assistance since the dawn of time and 99.9% do not get repossessed and very often do pay thier folks back all in good time without the world comming to end.

The main problem is my father does not wish to write a letter stating its a gift when it's not and I also does not like having my solicitor having a letter from him saying he gave me £12k in case I wanted to not pay him back.

It sounds like my best bet is to talk with my lender and re-explain the situation with the deposit and see how much of a problem it's going to be.

Really do wish I never told them and just said it was part of my savings...

FraudBuster

3.2 Value

The deposit is being paid by someone other than the purchaser. You should ask why, where the money is coming from, and whether this information has been properly disclosed to the lender.

http://www.lawsociety.org.uk/productsandservices/practicenotes/mortgagefraud/2607.article