Bank of Mum and Dad to the rescue??

GMS

You can't say it is more of a gift than a loan when you will be taking repayments from your son.

The deposit is a loan and you need to ensure 100% that this is acceptable to the lender. Seems to be their answer is quite vague.

May well not be an issue in branch but when the solicitors ome to do the conveyaning the source of deposit will be clarified and referred bak to lender if necessary.

It is vital to make sure it is fully understood by the lender and declared properly in order to ensure no issues at the completion stage.

Phrases such as 'more of a', 'not quite a', 'per se' etc are not really helping. Ensure that the lender is happy to accept a loan as the deposit and have it noted.

holly_hobby

GMS wrote: »

You can't say it is more of a gift than a loan when you will be taking repayments from your son.

The deposit is a loan and you need to ensure 100% that this is acceptable to the lender. Seems to be their answer is quite vague.

May well not be an issue in branch but when the solicitors ome to do the conveyaning the source of deposit will be clarified and referred bak to lender if necessary.

It is vital to make sure it is fully understood by the lender and declared properly in order to ensure no issues at the completion stage.

Phrases such as 'more of a', 'not quite a', 'per se' etc are not really helping. Ensure that the lender is happy to accept a loan as the deposit and have it noted.

You heard the man !

There are too many instances where things such as this go belly up, and the bch advisor says "oh sorry, you see that was our interpretation/understanding"

It you are only taking payment equivilent to the return from a savings account as you say, thats a loan arrangement not a gift .... as (I disuccsed in my initial post) the monies have indeed been given in consideration (exchange), in this case for payment of nominal interest .... still a loan, still has to be delcard on your tax return and I'm with GMS, I'm not comfortable that they really understand the situ, either by the way its been explained, or their interpretation.

Get it in writing ... or just give as a true gift - with no requirement of repayment in any format.

Hope this helps

Holly x

jennifernil

Setting aside all the "legal stuff" discussed above, do you need to make it so complicated?

Are you going to set a variable interest rate, calculate daily interest, keep track of his payments? Will he pay interest only, or will there be some repayment element?

If you can afford it, why not forgo the interest and regard anything he pays you as repayment of the capital? Then no need to worry about the taxman either.

Rates are low now, so you would be losing say £600-£900 per annum for the sake of keeping things simple.

I do agree with Holly and GMS however. It really should be a straightforward gift. Could he not save say half the amount first and you gift the other half, match his savings?

Victorthe2nd

Thanks to everyone. It's not complicated. I've had a 3rd conversation with NatWest. I want to give my son a sum of money to let him add to what he already has to make a decent deposit on a property and ensure that he can borrow what NatWest have offered / make sure he gets the property he wants. There will be no formal agreement between us. We are effectively treating this as a gift and not a loan. We will sign a Deed of Gift to that effect -that will be handled by our solicitor.We are simply saying to our son, on an informal basis, "pay us an agreed amount each month, not as a repayment but to recognise the interest we would earn if we invested it". That is not a repayment of debt, nor is the money a loan. It may be that, at a future date, he pays us the capital back but that is between us and him. There is no formal recognition of any private arrangement we may make. NatWest are perfectly relaxed about it and the 3rd advisor even said that her parents had done the same for her brother who is also caught in the London trap of horrific rents and high property prices. Thanks to everyone who has taken the time and trouble to add their views to this discussion!

GMS

Here we go again with the terms. It is 'effectively' a gift. It is not a gift as you are expecting a return on it.

Signing to say it is a gift when it isn't is up to you but clearly it is not.

Will Natwest not agree to the real scenario?

You say it is not complicated. As a gift it isn't but as a loan it may well be.

Oxid8uk

My parents lent my partner and I a large amount of money to help us buy a house. They wrote a carefully worded letter to our lender specifying that it was a loan but that they only expected us to pay it back as and when we had the capital to and that there was no time limit on when they expected to have it paid back by. As we had no formal arrangement to pay back X amount a month this ‘loan’ was not taken into account by our lender when looking at affordability.

Our lender was fine with that, and they are known to be one of the pickiest out there! So it can be done without being complicated.

Dave_Ham

Oxid8uk wrote: »

My parents lent my partner and I a large amount of money to help us buy a house. They wrote a carefully worded letter to our lender specifying that it was a loan but that they only expected us to pay it back as and when we had the capital to and that there was no time limit on when they expected to have it paid back by. As we had no formal arrangement to pay back X amount a month this ‘loan’ was not taken into account by our lender when looking at affordability.

Our lender was fine with that, and they are known to be one of the pickiest out there! So it can be done without being complicated.

And when you gave that letter to the "advisor" in HSBC they filed it straight in the bin and put gift on their system. This way you got what you wanted and they got another application towards their target.

OP - take a look back through this, you have rose tinted glasses here.

In the real world, this goes on. Parents put gift and in reality child pays them back.

This does not make it right though..

If your Son can afford the mortgage, tell them it is a loan and declare it as part of affordability.

If I had time, would pull up their criteria which would state what we are all confirming..

Not knocking you, but there is no mitigation or middle ground here.

Oxid8uk

Dave_Ham wrote: »

And when you gave that letter to the "advisor" in HSBC they filed it straight in the bin and put gift on their system. This way you got what you wanted and they got another application towards their target.

That may well have been the case but at least HSBC cannot come back to us and say we committed mortgage fraud. My dad was adamant that he was never going to class the money as a gift, to protect both us and him.

kingstreet

Lenders look at two things when assessing a loan for a deposit.

Will it affect affordability if payments are required and will the "donor" be taking some kind of charge over/interest in the property?

Here's one leading lender's position. The first bit about source of deposit is a little superfluous.

Proof of deposit

We may request proof of deposit, for example if a First Time Buyer was putting down a large deposit. We always require evidence of the deposit where it is £100,000 or more and is not coming from the simultaneous sale of a borrower’s existing property.

We can accept deposits provided by gift or loan. We will not accept a gifted deposit if:
provided by the vendor (unless an acceptable new build incentive from the builder/developer);
protected by a Deed of Trust (or similar);
the person providing it will be living in the property, but is not named on the mortgage;
or there is a beneficial/equitable ownership/interest in the property.

The use of a second charge could indicate the amount provided
is not a gift and further clarification may be required. We do not
allow a second charge on any flexible mortgage products.

Where the source of deposit is a loan, you should provide the
following details in the notes section on Introducer Internet:
amount;
lender (explain background if not a financial institution);
loan terms (e.g. interest rate, payments required);
any security required e.g. second charge; and
confirmation that payments have been factored into affordability.

The conclusion here is that care needs to be taken to ensure the borrower fully understands the lender's requirements before opening the mouth and saying something detrimental.

There is no alternative to getting it in writing.

Thrugelmir

Oxid8uk wrote: »

They wrote a carefully worded letter to our lender specifying that it was a loan but that they only expected us to pay it back as and when we had the capital to and that there was no time limit on when they expected to have it paid back by. [/FONT]

Did you and your partner sign the "letter"?

Was it independently witnessed on signature?