Is a loan from parents possible?

Girlwithnoname

We are first time buyers in London and have a great opportunity to buy the flat we currently rent, at a decent price below market value. Here's our position:

We could buy the flat at £315,000, but to reasonably afford the repayments we would need to get an 85% mortgage.
We have £38,000 for a deposit (with additional savings for stamp duty, fees etc), but would need another £7,000 to access an 85% mortgage.

How would we be able to negotiate borrowing this money from our parents? Ideally we would borrow with an agreement to pay back after the fixed term of the mortgage (4 years). When we come to remortgage, would we be able to 'withdraw' a sum of money and effectively increase the mortgage?

I'm sure this type of borrowing is complicated, if at all possible, but we could have a real bargain on this property and are keen to make it work.

CKhalvashi

No flaw with this plan, but it would need to be declared to the lender as a loan, otherwise is a fraudulent application.

CK

Dave_Ham

As stated, you will need to declare the monthly repayments and it will form part of affordability.

There will be a couple of lenders who are unhappy with this sort of arrangement, however many are fine.

I think you really need to be sure you can afford this mortgage though, as the rate differential between 85% and 90% (even on this mortgage size) should not be the difference between affordable and unaffordable.

Best of luck

Girlwithnoname

Thanks both. I might not have explained exactly what we need to know...

We will want to pay the parental loan back as a lump sum at the end of the fixed term deal, so will not be making monthly payments. Would it be possible to use some of the money we had paid into the mortgage to repay the loan when we move into a new fixed term deal, thus re-increasing the amount we owe by 7k at the end of the first fixed term deal. Does that make sense?

Dan Have - Thanks for asking us to look at affordability. We've looked closely at our income and expenditure, including changes to income if I was to go on maternity leave. The difference in repayments for 85% and 90% is £200 per month, which does make quite a difference for our budgeting.

Girlwithnoname

Having looked around a bit more, maybe I'm asking about a Mortgage equity withdrawal?