Declined mortgage due to gifted money?

Thrugelmir

gildedlily wrote: »

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.

The lender will base their mortgage offer on the purchase price or the surveyors valuation which ever is the lower.

What's the difference between the agreed price and the surveyors valuation.

holly_hobby

Thrugelmir wrote: »

The lender will base their mortgage offer on the purchase price or the surveyors valuation which ever is the lower.

Not always on a family discounted pch, there are several lenders whom accept this arrangment and the diff between mkt to actual pch price the effective deposit - must be immediate family member.

However, the OP is confusing me with stating its a cash gited deposit, then stating its equity ... or is it a combination ?? (my head hurts:o !)

H xx

GwylimT

A cash deposit can be gifted to/from a relative, the issue is most likely that your boyfriend isn't a relative and therefore many lenders will now not accept the gifted deposit.

Thrugelmir

holly_hobby wrote: »

Not always on a family discounted pch, there are several lenders whom accept this arrangment and the diff between mkt to actual pch price the effective deposit - must be immediate family member.

However, the OP is confusing me with stating its a cash gited deposit, then stating its equity ... or is it a combination ?? (my head hurts:o !)

H xx

Market value in this instance is quite possibly overstated.

GMS

Who owns the house currently? You said siblings and parents. Do you own any of it?

If your parents own it or part of then how can they give you a cash deposit for it? If they are selling it then they will get the deposit back meaning it is not a gift.

You have also stated it is being bought for more than the value as stated by the valuer. What is the difference?

How much is the purchase price? What was the open market value? How much CASH deposit is being gifted by your parents?

Your broker should be sorting this.

gildedlily

Thank you all, huge apologies if I am confusing you!

To clarify:

I currently rent & live in the property in question. It is currently owned by my mother & father & his siblings. All have agreed to sale.

Purchase price & discount: I do not believe that the price is discounted. The other siblings would not agree to a family discount - they asked for three estate agents to give their valuations and to take the mean of three, which we did. That price is what I am paying. Am I correct in thinking that there is no discount here?

Mortgage application 1. Initially I was going to be the sole purchaser of the property. I applied (through a broker) for a mortgage with Abbey. My parents offered me a substantial sum of money as a gift to help, I added a good deposit and the mortgage was approved. The Abbey valuer for the mortgage application priced the property at approx £4000 less than what I am paying for it. He mentioned in his report that the transaction was taking place between family members on a discounted basis and this reflects the valuation. I can't see how he came to that conclusion (see above) unless he thinks the discount is £4000 less than the price I am paying - any advice on this, please?

mortgage application 2. My long-term boyfriend wanted to share in the purchase of the property so the forst application was scrapped & a second application was put in (by the same broker, same fix, same percentage) for a similar Abbey mortgage. We both have a deposit, my parents still offered the same gift of money to me, yet now this gift is viewed as a "transfer of equity" & the mortgage is declined because of this.

Questions:
What is the difference between a transfer of equity & a gift?
Is this problem only because my boyfriend is not family?
Is there any way around this issue?

I hope that is clearer...I am primarily concerned as to the change in view of the gift of money from my parents.

Thank you all, again.

gildedlily

GMS wrote: »

Who owns the house currently? You said siblings and parents. Do you own any of it?

If your parents own it or part of then how can they give you a cash deposit for it? If they are selling it then they will get the deposit back meaning it is not a gift.

You have also stated it is being bought for more than the value as stated by the valuer. What is the difference?

How much is the purchase price? What was the open market value? How much CASH deposit is being gifted by your parents?

Your broker should be sorting this.

Hi,

I do not own any of the house.

The gift of money from my parents is less than their 1/3rd of the house - yes, in the long run I guess they will get back some of that gifted money. Is that a problem?

The difference in value - the open market value was £4000 more than that stated by the valuer.

My broker said that Abbey would not budge, but only said that it was because the gift had now been classed as transfer of equity. I will keep on discussing this with him, but thought it important to ask advice from others in this situation in case there is something that he has missed/not dealt with before.

chambta

You need a better broker!

Mokka

It is currently owned by my mother & father & his siblings. All have agreed to sale.

If you are not paying your mother and father for their share of the property then they are gifting you their share of the property. It is my understanding that on top of that they are giving you some money to pay off your dad's siblings. That's what I deduce from your own post.

Purchase price & discount: I do not believe that the price is discounted. The other siblings would not agree to a family discount - they asked for three estate agents to give their valuations and to take the mean of three, which we did. That price is what I am paying. Am I correct in thinking that there is no discount here?

The market price is NOT a valuation by estate agents. If you want to have the house valued you need a surveyor (for whose services you will need to pay). Or you can accept the valuation by the lender's surveyor.
The market value of the property can only be established by looking at actual sold prices of similar properties in your area in the recent months.
To give you an example from my area: flat valued by an estate agent at £280k, sat on the market for 6 months, was reduced to £250k and eventually sold for £230k. Estate agents prices are fantasy aspirational prices- I am surprised that yours was only 4k overvalued.
Saying that, nobody is stopping you from paying your relatives what they are asking- it seems they are doing you a favour.

The Abbey valuer for the mortgage application priced the property at approx £4000 less than what I am paying for it. He mentioned in his report that the transaction was taking place between family members on a discounted basis and this reflects the valuation. I can't see how he came to that conclusion

Again, he is thinking your parents are not getting paid for their share, so the price you are paying is discounted.

my parents still offered the same gift of money to me, yet now this gift is viewed as a "transfer of equity" & the mortgage is declined because of this.

I think maybe they did not notice the 'transfer of equity' issue previously, or the rules have changed.

Questions:
What is the difference between a transfer of equity & a gift?
Is this problem only because my boyfriend is not family?
Is there any way around this issue?
I would say your parents are transferring their share of the property for free- that's equity transfer. Gift is usually cash. Bear in mind that I am a newbie myself and not a professional, but I am in the house buying process myself

I hope that is clearer...I am primarily concerned as to the change in view of the gift of money from my parents.


If you are paying your parents for their share of the property then you should make it clear, maybe the bank just got confused about your arrangement like the rest of us on this forum!
My conveyancer sent me a whole load of paperwork regarding gifts towards a mortgage, so I reckon this is a super important issue. Probably should discuss it with a lawyer.

gildedlily

Hi Mokka,

Thanks for the reply & your help. Sorry - total newbie & feel bad that people are confused. I titled the thread "Declined mortgage due to gifted money" but I think somewhere things have become clouded as the situation is not a clear-cut one & people have assumed that it was about gifted property.

Mokka wrote: »

It is currently owned by my mother & father & his siblings. All have agreed to sale.

If you are not paying your mother and father for their share of the property then they are gifting you their share of the property. It is my understanding that on top of that they are giving you some money to pay off your dad's siblings. That's what I deduce from your own post. No, my parents are gifting me some money to help with the total purchase of the house. There is no gifting of property at all here.

Purchase price & discount: I do not believe that the price is discounted. The other siblings would not agree to a family discount - they asked for three estate agents to give their valuations and to take the mean of three, which we did. That price is what I am paying. Am I correct in thinking that there is no discount here?

The market price is NOT a valuation by estate agents. If you want to have the house valued you need a surveyor (for whose services you will need to pay). Or you can accept the valuation by the lender's surveyor.
The market value of the property can only be established by looking at actual sold prices of similar properties in your area in the recent months.
To give you an example from my area: flat valued by an estate agent at £280k, sat on the market for 6 months, was reduced to £250k and eventually sold for £230k. Estate agents prices are fantasy aspirational prices- I am surprised that yours was only 4k overvalued.
Saying that, nobody is stopping you from paying your relatives what they are asking- it seems they are doing you a favour. Sure, of course. My query was why the Abbey valuer had thought that it was discounted? Maybe he heard family home & assumed.

The Abbey valuer for the mortgage application priced the property at approx £4000 less than what I am paying for it. He mentioned in his report that the transaction was taking place between family members on a discounted basis and this reflects the valuation. I can't see how he came to that conclusion

Again, he is thinking your parents are not getting paid for their share, so the price you are paying is discounted. Hmmm. I have read the agreement and there is no mention of a gift of 1/3rd share to me

my parents still offered the same gift of money to me, yet now this gift is viewed as a "transfer of equity" & the mortgage is declined because of this.

I think maybe they did not notice the 'transfer of equity' issue previously, or the rules have changed.
Seems odd to think they did not notice the gift of money. Perhaps the rules have changed in the last month or two - but I would hope that they would state that that was the reason for the refusal.
Questions:
What is the difference between a transfer of equity & a gift?
Is this problem only because my boyfriend is not family?
Is there any way around this issue?
I would say your parents are transferring their share of the property for free- that's equity transfer. there is no transfer of property Gift is usually cash yes, money is being gifted to me. Bear in mind that I am a newbie myself and not a professional, but I am in the house buying process myself Good luck with your purchase!

I hope that is clearer...I am primarily concerned as to the change in view of the gift of money from my parents.


If you are paying your parents for their share of the property then you should make it clear broker wrote the application, but he knows that it is a money gift, not a gift of property, maybe the bank just got confused about your arrangement like the rest of us on this forum! Maybe, I was just answering the questions people asked, but I had hoped a broker could explain the situation as it is his area of expertise.
My conveyancer sent me a whole load of paperwork regarding gifts towards a mortgage, so I reckon this is a super important issue. Probably should discuss it with a lawyer.Good advice!