Source of Deposit

RTW

Hi there,

I am about to apply for a mortgage after doing much research.

One thing I am still unsure about is the source of the deposit. I have a deposit of over 35% which is made up as follows:

40% Own Savings
40% Gift from parents
20% From Girlfriend

Obviously no issues with my own savings.

I am correct in thinking that the gift from my parents I should get them to write a brief letter stating that it is an outright gift and not to be repaid?

The most controversial part will be the part of the deposit from my girlfriend. It will be only myself on the mortgage. (it is not an option for a joint application due to her lack of credit history), but my girlfriend is happy to put her savings into the house to increase the deposit amount. We will have a joint mortgage later down the line but not immediately.

I presume potential lenders would question this? How could I overcome this being an issue? Slightly dishonest, but she could also state its a gift if this were to help. Any help appreciated.

Yorkie1

Lenders have a problem with a gift coming from someone who is living in the house but hasn't contributed to the mortgage, as it makes it harder to repossess if necessary.

If she isn't to live in the property, then I think lenders may still have a problem as she's not a close relative of yours, but hopefully the brokers on here will confirm one way or another.

Have you and your girlfriend actually visited a broker to see what is possible and to check whether anything can be done with her credit record, or are you presuming it won't be possible?

If you haven't already visited a broker, best to get all 3 copies of your credit reports each, then do so.

Edit: yes, your parents will need to sign something saying it's an outright gift. Different lenders have slightly different requirements - your solicitor will advise the details in due course.

ethank

I think the lenders will have an issue that 60% of your deposit is not coming from your own resources, it is coming as a gift.

I know Nationwide only accepts family gifts rather than one from your girlfriend.

I think if you are applying for 65% LTV mortgage there is no reason why your girlfriend might be accepted - if as you say it is just she has no credit history.

Don't be dishonest to a mortgage lender. If they find out they can put a fraud marker against you name, which will make it difficult for you to obtain further credit. Some cases have even gone to the police.

You've said

RTW wrote: »

We will have a joint mortgage later down the line but not immediately.

A frank question but is this about you not wanting to commit to such a massive purchase jointly or about her having no credit history right now? Perhaps if it might be the former, then you should not take her deposit.

kingstreet

A 65% mortgage will not be a problem on a joint basis, even with no credit history. You'd probably get a way with one borrower with a small amount of adverse, with many lenders at that LTV.

Going sole route and trying to make a gifted deposit from someone to be resident in the property but not be party to the mortgage/ownership stick would probably be more difficult.

The brokers on here can probably give you a copy of the template Gifted Deposit Letter we all use. PM me your email address and I'll gladly send you a copy.

RTW

Regarding my girlfriend's credit history she has never had any debt other than a rolling phone contract and is foreign, not yet with a British passport and only fairly recently on the electoral roll...

...I am keen to buy asap. I'm certainly keen to go down the sole route.

I should have mentioned that she won't be living in the property - at least not for a period of at least a year. How does this affect the use of her savings towards the deposit?

Kingstreet - I have PM'd you my email address. Thank you.

Kynthia

RTW wrote: »

...I am keen to buy asap. I'm certainly keen to go down the sole route.

Then why are you using her money to do so? You will be putting it at risk for her as she will have to legally gift you the money and have no right to any of the property. If you aren't willing to buy jointly then buy with your savings and your parent's gift as the deposit. Then when you are ready to own jointly she can use her money to buy into the property and be added to the deeds and mortgage.

ethank

I may be old fashioned but I agree. If it were me, I would either give her security over her deposit by putting her on the mortgage or I would not use it.

kingstreet

So she's not UK resident and not going to be living in the property?

It's a lot more helpful if you explain all the issues at the outset and not add stuff later on.

A "gift" from a non-relative from outside the UK is going to be very difficult. You are going to struggle with this.

Definite broker job now.

[Deleted User]

If the price of the property is £120,000 and your deposit is 35% that makes it £42,000. If 20% of that deposit is from your girlfriend it's only £8400, which is less than 7% of the total price. Why would you choose to complicate things so much when you have a big enough deposit for most mortgages without the extra 7%? Seems like an odd choice. Looking at your previous topic it seems like you're already in a tricky spot with your eligibility so this seems like a curious choice.

Any reason you need the extra 7%? A specific mortgage deal?