Advice for FTBs

Amelia3105

So my partner has just been given a very generous offer from his family to give/lend him the funds for a deposit...

Now he is very keen for this to be "our" house, but I have a few concerns:

- Obviously, this deposit is his - whilst his family see it as something for the both of us, they clearly would not be giving it to me were I not with him

- Based on his salary, he may not be able to borrow very much. Our combined salaries would allow us to borrow a larger amount, but I would not feel entitled to half of the deposit should we sell/split?

- My credit rating is poorer than his, and I find it difficult to tell how much of an impact this would have. Obviously the greater the credit score the better, but are there specific points that jeopardise a mortgage application more than others? I would also want him to check his to see exactly where he stands.

- I would insist on contributing, but would not want to be left with nothing if it was all to turn sour if I have no part in the mortgage (fingers crossed that won't happen!!!)

Any advice would be much appreciated as I would like a considered plan before he gets carried away with himself....

Fire_Fox

Give/ lend are two completely different kettles of fish, any lender will be looking for a no strings deposit and preferably evidence of budgeting/ saving. This can be protected for your partner's benefit with a Deed of Trust.

If you have no savings and adverse credit and he has a low income this sounds like a non starter to me. How would you fund repairs and maintenance? How will you pay the mortgage if one of you falls ill or injured and cannot work, is made redundant, nightmare pregnancy?

Paying a mortgage is no guarantee of a return in a few years if you split or sold, you need to factor in all the costs of buying and selling, rising or falling market, the fact that the interest on the mortgage at least is akin to rent, it pays for a roof over your head is not a savings plan. You could end up many thousands, even tens of thousands out of pocket, in this market you could be taking on all of the risk for limited chance of benefit, gambling. Remember you would likely be jointly and severally liable for the FULL debt not half each.

See the article on credit ratings on the main MSE site. Once you have both accessed your credit files and cleaned up what you can (closed accounts, checked you are listed on the electoral roll, not linked to old addresses or people) then see a mortgage broker.

grifferz

Amelia3105 wrote: »

So my partner has just been given a very generous offer from his family to give/lend him the funds for a deposit...

Note that unless your partner's family are willing to sign a letter stating that this is a gift that is non-refundable and that they will retain no interest in your property, any lender is likely to consider this a debt and not an acceptable basis for a deposit.

Amelia3105 wrote: »

- Obviously, this deposit is his - whilst his family see it as something for the both of us, they clearly would not be giving it to me were I not with him

Can you elaborate as to what your concern is here?

Bear in mind that the most usual setup would be for both of your names to be on the mortgage, thus you are both jointly and severally liable for the entire mortgage. As the deposit (and property) secures the mortgage, this gift would in fact be to both of you.

There are legal steps you can take to protect the equity of individuals. You will need to explain more about your concerns.

Amelia3105 wrote: »

- Based on his salary, he may not be able to borrow very much. Our combined salaries would allow us to borrow a larger amount, but I would not feel entitled to half of the deposit should we sell/split?

Have a read up on "tenants in common" and "deed of trust". It is possible to record who put in what percentage and who should get what percentage upon sale.

Amelia3105 wrote: »

- My credit rating is poorer than his, and I find it difficult to tell how much of an impact this would have. Obviously the greater the credit score the better, but are there specific points that jeopardise a mortgage application more than others?

Have you requested your free statutory credit report from the three major agencies to see what the issues are? If you have bad debts you will need to sort them out before you go applying for a mortgage.

Amelia3105 wrote: »

- I would insist on contributing, but would not want to be left with nothing if it was all to turn sour if I have no part in the mortgage (fingers crossed that won't happen!!!)

You will need to discuss with your partner exactly what you will be contributing and what you feel this entitles you to.

There is a view that if you did not contribute to deposit at all (was all partner's savings and gift from partner's family) and do not pay any part of mortgage, then are you entitled to any of the equity of the property? After all, that only leaves you with cost of living which would be similar if you rented.

You may disagree and may have a point; that is for you and your partner to agree on and then I would suggest best to formalise in writing (this is a very common thing to do and should not be considered in any way mercenary or unromantic).

I assume when you say "I would insist in contributing … I have no part in the mortgage" you actually mean that you would pay part of the mortgage payments but not be named on the mortgage. A lender is unlikely to be happy with you not being named on (and thus liable for) the mortgage while you are named on the deeds, because that would mean you have claim to the property while not being responsible for the mortgage. So you may have no choice but to be named on the mortgage; still it would be between you and your partner to agree how much of it you pay, and you can formalise that arrangement.

If I were in your situation here's what I would do:

• Request all your free credit reports for both of you, identify any issues and see if you can resolve them. No point going further until you do.
• Work out your joint savings and any gifted deposit, minus your debts. Work out your joint salary. Check this makes a purchase affordable. Don't forget you'll need a few thousand pounds on hand for fees even if you buy a fully-furnished immaculate dream home.
• Talk through with your partner how you both want it to work on sale, if you split up, if one of you dies, what about if you have to sell in negative equity, etc. etc. Write it all down. Take it to a family law practitioner who offers a free half hour to check it all fits in a deed of trust that does what you both want.
• If you got this far, start your house search!

kingstreet

Following grifferz' excellent suggestions;-

Equifax

https://www.econsumer.equifax.co.uk/consumer/uk/order.ehtml?prod_cd=UKSCR

Experian

http://www.experian.co.uk/consumer/statutory-report.html#orderReport

CallCredit

https://www.callcredit.co.uk/stat-report-online/index.php?action=basket_add&tpl=setRegister&package=63&amount=1&mode=clear