If family loans you money to buy house does it count against you with the bank?

wannabe_credit_free

Sounds like mummy is a manipulator. Personally I would turn her offer down, given the strings attached...

Nebulous2

You have been made an offer with strings and going into it with an awareness of the strings is certainly necessary - but turning what on the face of it is an extremely generous offer down?

Move in - save the rent you would have been paying and put that to your business idea. Best case scenario you eventually get a free house. Worst case scenario you get free accommodation until it falls apart.

Family members are perfectly entitled to say, I'm willing to help you get a decent house but I don't think this business is a good idea and I'm not willing to help with that.

It also sounds as though they are trying to protect their family money if your relationship doesn't make it. Again that is understandable. They're happy to contribute cash to a family home, but don't want to see you disappear with half of it in a couple of years time.

It's laudable that you have turned down offers of financial assistance in the past, and only you know how messy the relationships are.

I can't really get inside that because I come from a culture / background without a lot of money, where occasional gifts and help with big purchases is the norm. Turning them down, or having them turned down, would be confusing and would shift the relationships in a way I suspect would not be for the better!

yorpington

I think you are completely right to turn it down, mate. I think from the info you've given your instincts are entirely correct. Plus this cuts you out of any ownership or right to the property. I've been in a similar situation and it did huge damage to the relationships involved. Too many strings!

Kayalana99

I was under the impression that they wanted to class it as a loan..not a gift so that if Mr OP and Mrs OP got divorced he couldn't claim right to the house as even tho it's in Mrs OP's name they have a loan against it for the value...so he would be entitled to nothing. (Although in theory if house prices rise above the debt he would get half that)

Assuming your the man, sorry just switch it round if not! :-)

pjread

ok so there will be a formal loan agreement... will you be party to it? And will interest be charged, and a charge registered against the house?

If there is no interest or ridiculous terms (e.g. "I can call in the whole loan at no notice, and if you can't pay I take the house") then I'd do as others suggest. Take it, stick what you would pay aside and be ready to cough up/play it as a 'normal' loan if things get messy. With no rent/mortgage you can probably save for your business plan too.

If there is interest payable, and isn't better than anything you could get on the open market, I'd dodge it. It does sound like it could get messy.

curls

Nebulous2 wrote: »

You have been made an offer with strings and going into it with an awareness of the strings is certainly necessary - but turning what on the face of it is an extremely generous offer down?

Move in - save the rent you would have been paying and put that to your business idea. Best case scenario you eventually get a free house. Worst case scenario you get free accommodation until it falls apart.

Family members are perfectly entitled to say, I'm willing to help you get a decent house but I don't think this business is a good idea and I'm not willing to help with that.

It also sounds as though they are trying to protect their family money if your relationship doesn't make it. Again that is understandable. They're happy to contribute cash to a family home, but don't want to see you disappear with half of it in a couple of years time.



I was going to add my thoughts but the above has already expressed them perfectly.

Prothet_of_Doom

I can see why if it's a loan, you can't get your 'grumby' little mitts on it if you ever split up, because Mummy can demand the loan is repaid.
But then her executors have the right to pass that loan agreement onto the benificories of her estate, and so would be part of her estate so Inheritance tax would be due, and they have a right to demand that you and your partner make loan repayments.
Obviously his inheritance MIGHT be more than the loan, so no problems as it just reduces the amount he gets, and there's no loan to repay.

Mummy sounds like she likes to play HMRC for a fool.

My worry would be about the controlling nature of the gift/loan.

The other problem is that mummy could always decide to demand loan re-payments are made.

I'd be very clear that your partner should continue to say "If you want to give us money with no strings attached, then I am happy to accept, but I'm not taking out a loan, I'm not getting into a written loan agreement with you, but If you want to put me, my partner or our children into your will that would be nice, but no loans between family. EVER"
If there were a business idea you really wanted them to invest in, I'd go for the old: If you put £XK into this ltd company we are forming, you'll get a 25% shareholding with no voting rights. We are putting in 37.5% each - which is our Intellectual Property and pre-work and ideas. (That's how dragons den works isn't it ?)

Tixy

A loan agreement by itself between partner and his parents wouldn't have prevented your partner from borrowing against the property. What would is them registering a charge against the house with the land registery.

How does your partner feel about the idea of having a property just in his name?

Perhaps you and he could suggest to his parents that you want to buy a property between you and in joint names but that if they are willing to gift him the money for half of the value then your partner would be very grateful and that you would then be prepared to take a mortgage for the remainder of the purchase price.
You and partner could then draw up an agreement to say how the property/equity would be dealt with in the event that one of you dies or you split up. i.e that he has a larger share in the equity due to the fact that he contributed the whole 50% deposit.

kiwi84

Once again thanks for everyone's thoughts. The issue of it being in my OH's name is not a problem. We are not married yet and I wouldn't ever expect his parents to put so much money even partly in my name. Of all the politics involved, things between me and him are fine and I'm perfectly happy for it to be in his name! My worry is that it would be a pointless debt in his name that needn't exist since they don't want it back. If we added to the value or got married/ started a business etc we would change the deeds and add my name to the percentage of it I had contributed to, but this dilema isn't about ME getting money. I also don't think their motivation is stopping me running off with half of it. (I hope)

Also, to reply to a few comments, we haven't ever asked them for any money towards a business, they just know this is what we are aiming for with our savings and they think that if we were financially successful ourselves we would never see them. It's actually pretty sad they think all that ties us to them is the offer of money, when it is the biggest thing driving us away from them.

The initial offer from them was some help towards a deposit, with us getting a mortgage and doing the rest ourselves, which I would feel much happier with. I think the whole issue has become about control, as they wouldn't be in control of any arrangement between us and the bank so they have tried to bypass that by waving their cheque book. x-caitlin-x I think you might have the right idea, that sort of approach is the only thing that has worked in the past. I try to be diplomatic without it becoming manipulative on my my part.

Thanks guys, I'm pretty sure we're once again turning it down. It's not even that I fear they would one day turn nasty and demand it back, it's that they already intrude on our lives so much now when we owe them nothing that I couldn't bear to be 'owned' by them as well. The OH feels this even more strongly than I do!

Going4TheDream

kiwi84 wrote: »

I'm pretty sure we're once again turning it down. It's not even that I fear they would one day turn nasty and demand it back, it's that they already intrude on our lives so much now when we owe them nothing that I couldn't bear to be 'owned' by them as well. The OH feels this even more strongly than I do!

^^^^^^^^^ this would be the reason I would decline.

Remember there is no such thing as a free lunch, and if a deal sounds too good to be true it usually is.

Old cliche's but miles of common sense in them.