second charge on the mortgage of FTB

lsupalova

Hi,

i am enquiring for my friends, who are FTB.
They have been offered a financial help from relatives in form of 10% deposit on their house (they would have had 10%themselves, but of course this puts them into a much better position), however these relatives would like to protect their financial interest by either securing a second charge on the property-with the mortgage lender having the 1st charge-or by entering into a legal trust document, where the relatives act as beneficiaries. (Hope this makes sense!). The 10% is to be repaid only once the house is sold-regardless of the value of the house increasing or decreasing, it will still remain 10%.
My friends FA mentioned applying for a mortgage with Nationwide or Santander.
My question is, has anybody got any experience with either of these lenders having a problem with this sort of legal document attached to the purchase?
FA "doesnt think there should be an issue" which in my opinion is not an answer good enough, but then he is the one in the trade.
Thank you very much for reading and for any help you can offer!!

Lucia

Gary123456790

Hi,

I cant specifically answer your questions but your friend should be aware that not all lenders are happy with gifted deposits (as it doesn't show a history of saving).

Im not sure if this is the same with a part gifted deposit, but it may make it slightly more difficult to get the mortgage, although on the flip side they will probably get a better rate as they have more deposit.

Gary.

Thrugelmir

lsupalova wrote: »

The 10% is to be repaid only once the house is sold-regardless of the value of the house increasing or decreasing, it will still remain 10%.

So what happens if the property is in negative equity?

holly_hobby

Gifted deposits are not a gift if there is a requirement to repay - and not an arrangement lenders are happy with.

If they choose not to disclose its true nature as in essence a loan, the xxx will hit the fan if the Donor seeks registration of a second charge with LR, which is by the express agreement of 1st chargee (ie the mge lender) and to which they may refuse - which in any event will rather reveal the mortgagor and Donor's hand I'm afraid, and then they are into fraudulent application waters.

Hope this helps (if not exactly music to their ears !)

Holly

Eellogofusciouhipoppokunu

Thrugelmir wrote: »

So what happens if the property is in negative equity?

Providing that the monthly payments can be met (on a repayment mortgage) then negative equity is only temporary.

Given time paying the debt down will correct the situation. If someone can afford a larger mortgage. Then directing the money this would cost into the existing mortgage would improve the situation speedily as well.

lsupalova

Hi all,

thank you very much for your answers.
We did think that this "gift" might make the application a bit more tricky.
We will see x