FTB (with parents lending some, and sharing some equity).

Chris12345678

Hi there, I wanted to see if I could get some general advice as to whether many/all lenders would be likely to accept the below setup:

I'm a first time buyer, with no debts (except my student loan and a credit card that is paid off every month) earning approx £25k/year looking to purchase a flat for between £170 and £210k (which is the lower end of what's available where I'd like to live... London prices!).

I have savings/deposit of £20k, my parents intend to add £50k to the deposit (they'd then keep that share of the equity), as well as lending me a further £50k which I would pay them back over the course of the mortgage (not necessarily starting immediately).

The situation is complicated by the fact that since leaving home (so during university and since) I've lived in a variety of shared houses, often for 12 months or less. During this time I've not always registered to vote, and until very recently my bank still had my parent's address.

I've so far only looked at the freely available credit check here: noddle.co.uk - and despite my credit card details it's not able to verify I am who I say I am.

I'll be grateful for any advice at this stage!

Chris

betmunch

My only advice at this stage would be to make sure you use a lender that accepts a loan AND and equity sare to a family member for source of deposit.

The address history is largely irrelivant, you either will or wont pass the credit score and this will be a factor, but you cant change it now

kingstreet

How can the parents take an "equity share" without being party to the mortgage?

CLAPTON

in general the mortgage lender will require the same names on the mortgage as on the deeds

betmunch

kingstreet wrote: »

How can the parents take an "equity share" without being party to the mortgage?

Same as any traditional shared equity arrangement. Only its with the parents rather than the builder or government.

I remember a lenders rep telling us this would be ok about 3 years ago, but I believe it has been removed from criteria now.

kingstreet

Shared equity means a second charge which would require the permission of the first charge holder. We're therefore talking about a £100k loan from parents, not £50k.

The_J

Right, your parents are going to have to "give" you that money. If you then choose to repay that in the future then fair enough but it will have to be a gift.

Hopefully that is OK. I cannot grasp the concept of loaning money to my children. Maybe I'm too lenient, maybe I hate the taxman too much to keep what I've earned.

betmunch

kingstreet wrote: »

Shared equity means a second charge which would require the permission of the first charge holder. We're therefore talking about a £100k loan from parents, not £50k.

Yes, total loan is 100k.
50K of that is an equitable charge - which will not be accepted any longer
50k of that is a traditional loan - which also will not be accepted.

no point us arguing over our understanding of the situation in public. Either way the OP isnt going anywhere unless things are changed.

kingstreet

Sorry bm, I've just realised, I didn't intend my first post to be aimed at you and it could be construed that way.

I should have mirrored the OP's use of "share of the equity" instead of using your phrase "equity share."

There was no criticism implied at what you were saying. I was more thinking aloud, TBH.

Kama527

How can the parents take an "equity share" without being party to the mortgage?

Chris12345678

Thanks for the above, interesting stuff.

Am I therefore correct in thinking there are two options in this situation (save forgetting about it and renting for the forseeable)?

1. Parents "just give" me the money. I sort the mortgage, any arrangement with my parents remains informal.

2. Parents apply with me for the mortgage. I then pay it each month, and whilst they'd be liable if I did or could not, they'd at least have something to show for their investment. Would lenders be bothered that only 1 out of 3 (or 1 out of 2) people applying for a mortgage intend to live at the property?