Implications of borrowing from relative towards deposit

Dubito_ergo_sum

Hi

Im a FTB and Ive got 15% deposit and 4k towards legal costs etc and then another pot of money towards moving, decorating etc, so the best LTV i can get would be 85% @ 3.74 5 yr fix.

One of my partners relatives may be able to lend me 10% so I would qualify for a 75 LTV @ 3.84 10 yr fix.

What are the implications from the mortgage lenders point of view ?
Ie would they reduce the amount they lend me by the 10% loan ?
Does this rule only apply to the deposit money or does it include legal cost etc?

To illustrate lets assume the house costs 100k
15k deposit savings
4k legal cost savings
10k loan from partners relative

If the below would increase the mortgage amount i could get
I could use the total savings of say 19k towards deposit plus 6k from the loan to make up the 25k deposit required, and then use the 4k remainder of the loan towards legal cost.

Does this make sense ?

I am trying to find a legal way of affording the 75 LTV 10 yr fix without the house price having to drop to 90k because mortgage lender is deducting the 10k loan from the mortgage amount.

I will be in touch with a broker Im just trying to get my head around the implications first, so any advice would be much appreciated.

Thank you

dimbo61

£10K LOAN! if it is a Loan the lenders will not be happy! If it is a GIFT with letter to prove it is a gift! that is OK.

Typhoon2000

Yes best way is for him to gift you the money.
It will be you choice later if you want repay the compliment sometime in the future.

Thrugelmir

Gifts need to be made from close relatives, i.e. parents. What relation to you is the relative?

Dubito_ergo_sum

Hes not my relative but my partners relative as mentioned in opening post.

If he wrote a letter to state its a gift when we both know its a loan surely this would be considered fraud ?
Besides if i had no conscience then i could pretend it was a gift, the letter said so, and never pay him back. Of course i wouldnt do that im just illustrating that there are several reasons why pretending its a gift would not be advisable.

I am looking for legal ways only.

Thanks

Paulaviki

If it is a loan they will take it into account for affordability and will want to know how much you will be paying back each month, depending on other outgoings it could affect how much they will lend you. Also they may ask what you'd do if the person loaning it to you suddenly wanted the money back in full etc.

Thrugelmir

Dubito_ergo_sum wrote: »

Hes not my relative but my partners relative as mentioned in opening post.

Doesn't answer the question I posed. As it does make a difference what the relationship is.

Dubito_ergo_sum

@Trugelmir they are brothers.

@Paulaviki
Thanks for you reply, I envisage a formal legally binding agreement between us both would be drawn up, as much to protect him from me defaulting as to protect me from him wanting the money sooner than agreed.

So if I understand this right, the monthly loan repayment would be taken into account and MAY reduce the mortgage amount i can borrow.
But the loan amount would not reduce the mortgage amount by 10k irrespective of the monthly repayment amount we agree on ?
Ie what matters is not the 10k loan but the monthly outgoing of £x, ie £20 would impact less than £200 ?

Yorkie1

Dubito_ergo_sum wrote: »

Hes not my relative but my partners relative as mentioned in opening post.

If he wrote a letter to state its a gift when we both know its a loan surely this would be considered fraud ?
Besides if i had no conscience then i could pretend it was a gift, the letter said so, and never pay him back. Of course i wouldnt do that im just illustrating that there are several reasons why pretending its a gift would not be advisable.

I am looking for legal ways only.

Thanks

Yes, you're right that it will be mortgage fraud if it is going to be a loan from the outset and you both wrote documents to the contrary.

Dubito_ergo_sum wrote: »

@Trugelmir they are brothers.

One quick thing - will your partner be on the mortgage too, or just you?

Thrugelmir

Dubito_ergo_sum wrote: »

@Paulaviki
Thanks for you reply, I envisage a formal legally binding agreement between us both would be drawn up, as much to protect him from me defaulting as to protect me from him wanting the money sooner than agreed.

Will be worthless. As you will be providing an undertaking to the lender that's it's a gift in the form of a signed declaration.

Quite possible the source of the gift will be an issue given the relationship.

amnblog

A first time buyer should not be messing about with a 10 year fixed rate in any case.