Declined mortgage due to gifted money?

gildedlily

Hi,

I would greatly appreciate some advice regarding a 10 year fix mortgage application with Abbey.

I am buying a family house with my long-term boyfriend. We have a good deposit and my parents have gifted me a substantial sum of money to help.

The reply from Abbey was that the mortgage had been declined because the money from my parents was classed as a transfer of equity.

The strange thing is, the previous application with the same details but where I was buying the home alone was approved.

I hope someone can advise me, please.

holly_hobby

Have they gifted you money, or are they selling a property to you that they own, at under value (the difference between this and the market value acting as the effective deposit) ?

Holly x

gildedlily

Abbey valued the house in their previous survey (when I alone was buying the property) at under the value that I am paying for it.

It is a family property (owned by 3 siblings, one third of which is owned by my parents).

gildedlily

I think Abbey's valuer said that it reflected sale within the family, but the value was obtained from a market value average of 3 local estate agents, if that helps?

Any advice or ways around this issue would be amazing, thank you.

Thrugelmir

Estate agents values are not selling prices. They are guide prices for marketing the property. Surveyors will base their valuation on recent actual activity not on advertised prices. .

holly_hobby

So this is a family discounted purchase, also referred to as a concessionary purchase with some lenders.

There are several lenders that will look at this arrangement, where in essence the market value (as confirmed by the surveyor) will (for mge purpoes) be classed as the purchase price and upon which the mortgage LTV will be based with regards to the amount you have actually agreed. But not all lenders will work on this basis as you have found.

Speak to a whole of market broker, explain the situ, you are buying from family, and your deposit will be the diff between market value and agreed pch price - as long as you meet status requirements (income and credit ref agencies), this will be an easy fix (eg Halifax, amongst others, consider such applications).

You'll pay stamp duty on the actual agreed pch price, not the market value that the mge app will be based on (your conveyencer/adviser will guide).

Hope this helps

Holly xx

gildedlily

holly_hobby wrote: »

So this is a family discounted purchase, also referred to as a concessionary purchase with some lenders.

There are several lenders that will look at this arrangement, where in essence the market value (as confirmed by the surveyor) will (for mge purpoes) be classed as the purchase price and upon which the mortgage LTV will be based with regards to the amount you have actually agreed. But not all lenders will work on this basis as you have found.

Speak to a whole of market broker, explain the situ, you are buying from family, and your deposit will be the diff between market value and agreed pch price - as long as you meet status requirements (income and credit ref agencies), this will be an easy fix (eg Halifax, amongst others, consider such applications).

You'll pay stamp duty on the actual agreed p
ch price, not the market value that the mge app will be based on (your conveyencer/adviser will guide).

Hope this helps

Holly xx

Thank you so much, Holly - I really do appreciate your advice.

I went through the same local mortgage broker both times (a matter of a few months apart).

I do not believe the price of the house is actually discounted. The other siblings would not agreed to a discount, and they asked for three estate agent prices to be obtained and a mean value used as purchase price, which was duly taken.

When I, alone, was going to undertake the purchasing of the property, the mortgage with Abbey was agreed, no problems. In the survey from the Abbey mortgage survey man he valued the house at several thousand pounds less than the purchase price I am paying, but stated that the price reflected family discount.

The first mortgage was approved (no problems with any checks) - and this was with the substantial gift from my parents.

How can it be that the second application (where my boyfriend is now buying in to the property) be declined because of the same gift from my parents, present in the first approved survey?

I am still trying to work out the reasons for the change in view toward the gift!

Thank you, again.

holly_hobby

If you're not party to the mortgage, it may be because your parents aren't your boyfriends direct family (if he was your spouse that would change things) ... although some lenders will accept this if you are resident in the property, engaged etc.

Whats your broker said ... really you should be having them solve these issues given that its he who is being paid a fee !

Hope this helps

Holly x

gildedlily

Thanks, Holly.

I will keep badgering the broker but he just said that he had tried to talk to Abbey but that they had declined the mortgage due to the gift being "classed as a transfer of equity". They won't budge, apparently, but there is a lack of clarity as to why.

We would both be on the mortgage and I already live at the property as I rent it. The gift will be to me, not my boyfriend (although it will be a joint mortgage it will be written in as tenants in common, with the gifted money being part of my portion of the house).

It just seems rather odd that the gift is the issue now...and the broker says that nothing can be done.

Is there any way to make sure that a gift is seen as a gift & not classed as a transfer of equity in the eyes of Abbey?

Thanks again

holly_hobby

You're confusing me ....

Is this a gift of capital ie an amount of money ?

Or

Is the gift a family discounted pch arrangement (as I've already discussed) ?

If its the later, its not a monetary gift but a gift of equity, so it can't be stated as a gifted monetary deposit because it isn't.

Your broker will need to place this with another lender, on the correct basis.

Holly

gildedlily

Hi,

It is a gift of money.