1st Time Buyers Mortgage Application - Deposit is a gift we don't yet have

Ms_Scarlett_2

Hello!

My partner and I are looking to buy our first house and are currently waiting on Yorkshire Building Society to get back to us about our agreement in principle for their 3.49% 5 year fix deal on 75% LTV, as we are fortunate enough to have parents in very comfortable financial positions who have very generously offered to help us out. Privately, this is more a loan of sorts, the understanding being that at some point in the dim and distant future when we come to sell (and if we make any profit on the property), we’ll pay some of it back to them, but this is all very loose and we certainly won’t be telling the mortgage company anything other than that the deposit was a gift to us.

Anyway, the issue we have is that as our 25% deposit is coming from our parents, so we don’t actually have the deposit in either of our accounts at the moment as – understandably - the parents don’t want to cash out their ISAs etc until the sale has been agreed and gone through.

Me and my partner are both in good jobs, have no savings to speak of (certainly nothing like 25%), both have pretty good credit histories (I had a couple of very minor late credit card payments from years ago, but none in last three years) and the loan we want is within their lending criteria for our earnings, but I’m concerned that applying for a mortgage when we don’t actually have the money in either of our accounts has been a really bad idea. This didn’t even occur to me when I put the application in, but now I’m really worried that they will turn our application down on this basis.

What do you think? Have we been very stupid here? I know YBS haven’t processed our application yet as they are currently still working on applications from last Tuesday 23rd and are very very behind. If you do think this will hinder our application, do you think there is much we can do at this stage? The vendors are getting really p*ssed off waiting for our offer (we thought getting an AiP would be pretty instant – YBS say 5-6 working days?!?) and I’ll be gutted if we then have to start again somewhere else, and with a dodgy credit search added into the mix.

Many thanks in advance for your advice.

garth549

You might be on shaky ground by not declaring that the deposit is a loan. You need to be upfront with them on exactly what the arrangement is.

kingstreet

They'll either accept the deposit is gifted or they won't. At this stage it doesn't make a jot of difference if it's in your account or someone else's.

jimjames

I've never seen an application where I have had to prove I have the deposit money already in my account to apply for a mortgage.

As above the source of the money may be an issue but lack of it being in your account will not.

casualwalks

Your parents will likely be asked to write a letter stating that they the money is a gift that does not need to be repaid and nor will they take any charge on the property. Are they prepared to do this?

Ms_Scarlett_2

Thank you all for these comments. Naively, it has never occurred to me that a gifted deposit could be seen as a negative. I thought you either had the money or you didn't and - provided it wasn't obtained fraudulently - it wouldn't matter how you obtained it.

Do many mortgage lenders look unfavorably on gifted deposits, then?

casualwalks wrote: »

Your parents will likely be asked to write a letter stating that they the money is a gift that does not need to be repaid and nor will they take any charge on the property. Are they prepared to do this?

They would absolutely do this. As stated above, this really isn't a proper loan situation. My parents are gifting me the money and then, if later we make a packet on the house (unlikely as that seems), or if my parents are in need, we might look to reorganise things to repay the kindness they have shown us in the beginning, but it is certainly not so structured as a loan, and they would have no problem writing a letter declaring it was a gift.

saverbuyer

Ms_Scarlett wrote: »

Thank you all for these comments. Naively, it has never occurred to me that a gifted deposit could be seen as a negative. I thought you either had the money or you didn't and - provided it wasn't obtained fraudulently - it wouldn't matter how you obtained it.

Do many mortgage lenders look unfavorably on gifted deposits, then?



They would absolutely do this. As stated above, this really isn't a proper loan situation. My parents are gifting me the money and then, if later we make a packet on the house (unlikely as that seems), or if my parents are in need, we might look to reorganise things to repay the kindness they have shown us in the beginning, but it is certainly not so structured as a loan, and they would have no problem writing a letter declaring it was a gift.

It sounds exactly like a loan.

Trollfever

Q. When is a gift not a gift?

A. When it is a loan for a property deposit.

Ms_Scarlett_2

Any chance of answering my question about how mortgage companies view gifted deposits rather than arguing semantics....?

saverbuyer

Ms_Scarlett wrote: »

Any chance of answering my question about how mortgage companies view gifted deposits rather than arguing semantics....?

Unfortunately if we forget syntax and semantics on the mortgage application there's a danger it could be viewed as fraud. Best to show some attention to detail.

Dave_the_Ginger_Cat

Some are OK with it, some are not. You need to be up front, and you may be asked to prove that it is non-repayable.

Just be open, it will avoid disappointment further down the line.