FTB Help With Gifted Deposit

Neslein_2

Hi,

I realize that this is a question that has come up many times, but despite my best searches I have been unable to find any advice on my abnormal situation. My girlfriend and I are looking to buy our first home together, we have been looking for some time and think we have found a perfect house. My situation changed dramatically in the past month as I had to petition for my own bankruptcy. This was solely due to my business plummeting, and despite every effort I have been unable to pay my debts. There was only 2 creditors in my bankruptcy, HMRC and a small credit card balance. We have also just found out that out landlord will be selling the house we are renting at the moment in the near future (we knew this when we moved in). The houses that my girlfriend and I love are small cottages, and we have found several under £140k. My girlfriend is able to secure a mortgage on her sole wage of up to £115k. The area that I am confused about is the deposit. Both sets of parents are willing to gift 50% of the deposit required to purchase the cottage we have seen. As I am an undischarged bankrupt I will be living with my girlfriend in her home, but as my parents are willing to put in half of the deposit, will this be viewed that I have an interest in the property? what I dont want to happen is that we move only to find out that the official receiver will try to repossess the house as there will be equity in it, but none of it is in my name.

Thank you for your time and any advice you are able to offer

richardw

Your parents would be formally gifting to your girlfriend to avoid any problems surrounding your bankruptcy, would they be happy with that?

Velvet_Glove

Barclays told us when we were sorting gifteds out that they, and most other mortgage companies, would only accept gifts from 'direct relatives', i.e. parents, I am assuming that it is just your girlfriend who will be applying for the mortgage, so be aware that they mortgage company might not like her having help from non relatives.

silvercar

Velvet_Glove wrote: »

Barclays told us when we were sorting gifteds out that they, and most other mortgage companies, would only accept gifts from 'direct relatives', i.e. parents, I am assuming that it is just your girlfriend who will be applying for the mortgage, so be aware that they mortgage company might not like her having help from non relatives.

One way round that is for his parents to make a gift to her parents, who would then pay all the gifted deposit.

It is a trust issue as to whether his parents trust her and the strength of the relationship.

grifferz

As an undischarged bankrupt the lender might not be happy with you being named on the mortgage, so mortgage would be solely in your girlfriend's name, in which case the lender may not be happy with you being on the deeds of the house. You may have to sign a declaration that you will retain no interest in the property.

As a consequence of that, when your girlfriend sells the property all the proceeds will be hers. If your parents would not be happy with the deposit they gifted potentially ending up outside their family (e.g. if your relationship with your girlfriend breaks down) then you may want to look into a trust agreement.

Also as someone not on the deeds and with no interest in the property, you'd effectively be a lodger with the lack of rights that entails.

Neslein_2

Thanks for all of the helpful advice so far, I realize that its a very complex situation but as we want to be out of our home, with no other suitable properties to rent around us we feel this is the best way forward.
My thoughts were the same as mentioned already that it would make sense for my parents to transfer money directly to her parents and then onto my girlfriend. There isn't any trust issues between the families, my girlfriend and I have been in a relationship for coming up to 6 years with only very few hiccups.
One other question which I have, the mortgage company need to know that the money is gifted and non refundable from our parents. We have every intention of paying both parents back when we are in a position to do so. But both parents would like some form of document saying that if we were ever to split up the proceeds would be split 50:50. I assume that the mortgage company need to know in the event of a repossession no one else will be claiming an interest in the property. Can a document be written stating how the money will be divided in the event of a sale without it affecting the mortgage?

Thanks

grifferz

Neslein wrote: »

money is gifted and non refundable from our parents. We have every intention of paying both parents back when we are in a position to do so.

This means it's not a gift BTW. I know what you mean though: you're under no expectation of paying it back, but you will do so voluntarily if and when you can afford to. Just be careful because if it isn't really a gift then you've technically committed mortgage fraud..

Neslein wrote: »

But both parents would like some form of document saying that if we were ever to split up the proceeds would be split 50:50. I assume that the mortgage company need to know in the event of a repossession no one else will be claiming an interest in the property. Can a document be written stating how the money will be divided in the event of a sale without it affecting the mortgage?

The normal way to do this is to buy as tenants in common (as opposed to the usual method, joint tenants) and then have a deed of trust (sometimes called a declaration of trust) drawn up by a solicitor. This holds the equity of the property in a trust administered for your benefits managed according to the terms you've agreed on, and the trust document can specify, amongst other things, how a sale is handled.

So, for example, you might draw one up saying that when it's sold, the mortgage is discharged and then you get back the sum your parents gifted, your girlfriend gets back the sum her parents gifted, and then any remainder is split 50/50 between you.

That is just an example and many other formulas exist which you may consider fairer. Make sure to consider what you will do if the property sells for less than you bought it for (i.e. that gifted deposit is eaten into).

This is none of the lender's business because the lender has first charge and will take their repayment before the terms of your deed of trust take effect.

However, I would have thought that if you are not named on the mortgage then you can't be on the deeds of the property and I am not sure that you can be a tenant in common for a property that you aren't even on the deeds of. Someone else may be able to clarify, but a solicitor practicing family law should be able to tell you during a free half hour consultation.

There is also the issue of whether it is actually fair that you share 50/50 in profit from a property that you haven't contributed any deposit or mortgage payments to, but that is a private matter between you and your girlfriend.