Giving second charge on property to my dad?

Crawfy88

Hi All, any help would be greatly appreciated.

My dad has very kindly offered to help me and my fiance buy our first house.
He is giving us a sum of money towards the deposit and in return would like the second charge on the house. So, if we default on our mortgage or sell it etc, he will get his 20% investment back after the bank have been returned their mortgage investment.

I have been speaking to my mortgage advisor and he mentioned that this should be done *after* the mortgage is confirmed and all contracts have been signed so as to not confuse the situation.
However, I think my dad would like something in place before he gives the money.

How would I go about this? I do not want to do anything illegal through my lack of knowledge or that could put our property in jeprody but I want to give my dad the piece of mind when he does give the deposit to us that he will one day get it back.

Thanks for taking the time to read this and help me in any way you can.

Dave_Ham

Ok - I totally understand what you are looking to achieve, although I know why your broker has said do after.

You will have to declare the money from your Father, and in reality most lenders would only accept if this was a gift.

Therefore they would certainly either oppose the 2nd charge, or pull the mortgage offer as this was not part of what they signed up for.

Would suggest, unless anyone knows something that I do not that you re-think your plan...

Yorkie1

I agree with Dave - this may not be a starter. I think that the main lender is likely to have a veto over the placing of a second charge. Also, as it's not an outright gift then it will need to be declared at application, potentially causing problems.

Annisele

How much of a deposit do you and your fiance have? (By that I mean how much money are the two of you personally putting into the house, ignoring your Dad's contribution).

If you have no deposit at all, then in effect you're looking to borrow 100% of the purchase price - 80% from a lender and 20% from your Dad. I wouldn't expect you'd get far with that.

The higher your deposit, the more chance you'll have of getting a mortgage loan.

opinions4u

Take a look at Lloyds TSB Lend A Hand mortgage.

That gives him his money back after 3 and a half years, with interest.

Most lenders will ask a question "are any other loans going to be secured on the property?" or similar. If the answer is yes they will invariably decline.

Most lenders will ask "source of deposit" and if your state loan they will invariably decline.

The other issue comes when you want to move. Dad gets his money back and you then have little or no equity to buy the next house with. There's a situation designed to create a family fall out!

kingstreet

Abbey/Santander has just had a change of criteria, but it seems they will still look at a loaned deposit with a second charge.

Thrugelmir

How much equity will you personally be injecting into the property?