Bank of Mum and Dad to the rescue??

Oxid8uk

Victorthe2nd wrote: »

I've got - on more than one occasion - comfort that what I'm doing is acceptable to NatWest, and am comfortable with the risk I am accepting in having a private arrangement with my son.

And this is exactly how myself and my father felt. If what we were doing was not acceptable with my lender then surely they would never had progressed our application to completion.

Good luck OP. Keep us posted on the outcome!

holly_hobby

I don't think it was just me who commented on the loan V gift issues (and what constitutes a loan) .... but nevertheless glad that you've found our input useful, if not exactly largely what you wanted to hear.

You say this has been verified by the in branch mge advisor(s) - there is a very recent thread on here, regarding a compliant re a NW mge advisor who told the poster that they were completely suitable for a mge, when it turned out after submission, they were anything but .... so you see where myself and the other advisors are coming from .... and why you want this formally verified with the UW/their legal dept, before you starting incurring legal fees and spending survey fees ... but we can only guide.

Hope all goes well for you ... and fingers crossed Natwest come through with shining colours and you are actually able to complete on the pch - which is the whole basis of all our comments made, which were done so to answer your query and protect you (honestly !) , your interests and mge/conveyencing costs if the offer is pulled at a late stage due to the circumstances of the deposit.

You'll of course need to be careful and consider if you should sign a disclaimer (which is commonly reqd by lenders in such situ's), confirming that the Donor has no interest or reservation with regards the gifted deposit (which also means that you would be legally prevented from trying to recoup the sum in the event of possession or sale).

Hopefully Nat West won't ask you to sign one, so you're not compromised as part of the exercise.

Hope this helps

Holly x

Credit-Crunched

From your responses, it appears that you have made up your decision to proceed with a 'private arrangement' contary to Mortgage professionals advice.

I would highlight another point for consideration, it is essential to have a a clear legal definition of a loan or a gift (a non repayable financial contribution)

Not just for the lenders sakes but also for your own. Money, relatives and relatives partners are a potentially toxic combination.

If you pay, say £30,000 non repayable gift into the home, and your son / daughter and their respective partners fall out, then youe money is gone. No chance for reclaim, its absorbed into the house.

If it is a loan, legally doucmented, then you would have a beneficial interest in the property until the loan is fully repaid. So if your son / daughter or their partner decides to claim the property then you will have legal rights behind you.

I can second guess your respose, of it wont happen to me. But sadly, I see day to day, week to week, instances of family fraud and financial feuds.

I think you have decided what you are going to do, and you have said that Holly is going on, but please,for the sake of your money listen to her.

Either have catergoric confirmation that Natwest accept that you have a private loan agreement with your child and this will not imapct the mortgage application.

To be honest, I think that when this comes to the legals, the sols will pick it apart.

Dont see this as an attack, it is just words of advice from someone who has seen this in the ugly later stages many times before.

Please remove emotion from this decision. See it as a business decision, not helping your child.

Credit-Crunched

Victorthe2nd wrote: »

Again thanks to everyone who's followed and contributed here. Obviously a lot of interest! In my mind:
1) I've now had 4 conversations with different people at NatWest (including one where the advisor went away to ask for a second opinion). These discussions are not with branch staff but with NatWest Mortgage Advisors all of who have, I must say, been exceptionally helpful and patient.
2) In every single case, the reply has been the same. If we are providing some of the deposit, then as long as we don't formally register our interest then NatWest are happy.
3) NatWest also - on each and every occasion - have confirmed that any private arrangement between us and our son is entirely our affair. They even suggested that any money to be paid to us should be declared on his affordability statement.
That seems pretty straightforward to me. We accept the risk that a private agreement carries and that we may lose our money. We also accept that, if he chooses to live with his partner and that relationship breaks up, then we get into a whole new area of discussion.

I take on board the constant points about terminology ("effectively a loan", please don't pick on it again, Holly, I've got the message) and legalities, but 3 mortgage advisors at NatWest saying the same thing can't all be wrong.

If my son chooses to pay me a set amount each month because he's a kind person,that's up to him and me. I can say no more now. I've got - on more than one occasion - comfort that what I'm doing is acceptable to NatWest, and am comfortable with the risk I am accepting in having a private arrangement with my son.

I hope that this is not a life changing sum of money?! You are very blase about the fact you may lose all your money in a financial dispute.

Without offending you, it appears that you are very blinkered and would do well to take a step back and consider, in 10 years, your sons partner has taken all of your money.

How would that make you feel?

If you dont listen to us financial folk, speak to some friends and ask if they would lend somone thousands of pounds without a contract, a formal repayment method and no legal backing at all.

Thrugelmir

Oxid8uk wrote: »

Or at least would have conditioned the mortgage offer to fully protect their interests?

Its not the HSBC's interests which are at risk. There's are covered by the terms and conditions of the mortgage contract which you entered into.

However there's no legal obligation on your partner to honour the "agreement".

kidmugsy

In summary, victor is determined to take part in a mortgage fraud while seeking to persuade everyone that it isn't. Yes?

Dave_Ham

Hold on - if they are mentioning that your Son needs to declare it as part of affordability calculations; then you have told them it is a loan from family and then everything is ok??

The issue is when the "loan" would make the case unaffordable and that it then becomes a "gift"

If it a loan, tell them that and declare monthly costs and everyone is happy...

Lavendyr

Victorthe2nd wrote: »

1) I've now had 4 conversations with different people at NatWest (including one where the advisor went away to ask for a second opinion). These discussions are not with branch staff but with NatWest Mortgage Advisors all of who have, I must say, been exceptionally helpful and patient.

Ultimately they can say what they like but they won't be the ones making the decision - that will fall to people (or computers...) 'above' them. So if you are telling them that you are making a loan (and be clear - if you have *any* expectation that you will receive interest *or* capital on this balance then it *is* a loan, not a gift) that's all well and good - but you can't be guaranteed anything unless a) you get it in writing or b) the computer says "yes".

Victorthe2nd wrote: »

That seems pretty straightforward to me. We accept the risk that a private agreement carries and that we may lose our money. We also accept that, if he chooses to live with his partner and that relationship breaks up, then we get into a whole new area of discussion.

Well, you don't really get into a new area of discussion - you get into a position where you might lose everything you've loaned (sorry - given) - without recourse.

Victorthe2nd wrote: »

but 3 mortgage advisors at NatWest saying the same thing can't all be wrong.

Refer you to my comment above. They might not be wrong, but at the same time they won't be the people who decide whether or not your son can borrow the money.

Victorthe2nd wrote: »

If my son chooses to pay me a set amount each month because he's a kind person,that's up to him and me. I can say no more now. I've got - on more than one occasion - comfort that what I'm doing is acceptable to NatWest, and am comfortable with the risk I am accepting in having a private arrangement with my son.

If that's the case and all is declared in full - and you really are happy with this arrangement - fair enough. Personally I would never borrow or lend money on this basis, even to family. It's just not sensible or practical.

And if you're really willing to take the risk that you might lose it all anyway - why not just go the extra step and make it a gift? That way your son and his partner are free of obligation, will have no complications in their mortgage application, and still have the option to gift you some money in return if they feel able and willing to further on down the line.

wesleyad

Sorry if i have missed this but if its a gift wont you have to pay tax on anything over 5k?

Have you thought of a scheme such as

http://www.lloydstsb.com/mortgages/lend_a_hand.asp

My partner and I used this scheme and it worked a treat; my dad got interest on his money so he was happy; there was no problem with gifts, loans, tax etc.

Lavendyr

wesleyad wrote: »

Sorry if i have missed this but if its a gift wont you have to pay tax on anything over 5k.

What kind of tax are you referring to?

There is no CGT on cash. There could potentially be IHT (as it would be a PET or potentially exempt transfer) but only if the giver dies within seven years of making the gift.

Also there is a £3k annual exemption which can be rolled up for 2 years per person, so mum and dad could theoretically give £12k without any IHT issues at all (assuming they didn't make any gifts in the previous tax year).

On the other hand if mum and dad are receiving interest on their "gift", that should be taxable income and should be declared as such to HMRC.