Help! - House buying - Deposit from parents

haddock_n_chips

Hi Everyone,

This is a little complicated!

My partner and I are buying a house together.

We are not married (yet!....)

Her parents have been given a lump sum of money from an estate sale. (her great aunt passed away)

They have kindly offered to give my partner this money to use as a deposit on the house.

They do however want this money back if we were to:

A.) sell the house (in all probability i think they would let us roll this onto the next house)
B.) we split up and sell the house
C.) one of us dies and we sell the house

Now i was under the impression we could just have a deed of trust drawn up stating this.

i.e. "parents have given X amount of money to Daughter to be used as deposit on property, if property is sold for reasons above (a,b,c) then parents will be due £x amount of money back"

However my conveyancing solicitor seems to think this is not possible.

They say:

They can give her the money as a gift, but that is exactly what it is... a gift and no longer their money so no comeback

Or they can Loan it to us (at 0% interest) however the mortgage company may not look too nicely on this

I've had a search around and this seems to be a more and more common issue and you can indeed get the deed of trust for this situation.

I cannot envisage any scenario where i would become such a PITA to try and walk away with half the house money and leave her and parent high and dry, its not in my nature but obv. legally it would make everyone a lot more comfortable for the document to be drawn up, which i am more than happy to sign.

Now i know a few of you out there will be of the opinion, well if they cant afford the deposit then they cant afford the house.

Well in fact we can afford the mortgage repayment, we've been renting for over 4 years together and happily paying £600pcm for rent + bills

This does however make it difficult to save towards deposits and with other halfs parent being in a position where they dont "need" this money (mortgage free) they have offered to help.

We dop have some savings ready but they would like us to keep this for costs we will accrue, new furniture and perhaps in the future using the money towards living costs if we start a family and one of us isnt working.

Any advice would be really appreciated as we are scratching our heads a little.

House offer has been accepted and mortgage application has been accepted (survey next week)

Over to you wise members of MSE

pinkteapot

Your solicitor is right that the problem here is your mortgage. Mortgage companies don't like anyone else having rights over the money in the house.

All they care about is being able to get their money back if they have to repossess. If the market drops in value a bit, they want to sell the house and get the mortgage balance outstanding back.

If someone else (not your or your partner) has some legal right to proceeds from the sale then this seriously muddies the water for the mortgage lender.

You can get a Deed of Trust that sets out what happens to proceeds from the house in terms of how they get divided between you two as joint owners. The issue is naming the parents on it.

The parents need to trust your partner. They gift her the money and have to write a letter to say its an unconditional gift. You then have a Deed of Trust that says that if you and partner split up and the house is sold, she gets £x and you get £y.

There then has to be trust between parents and partner that she will repay them from her proceeds from the sale.

To be honest, I would clarify the "sell the house" term with the parents. As you say, if you trade up in a few years, will they expect it back? Personally I wouldn't be happy with this as it seems like they're trying to force you to stay in that particular house. You can't assume they'll be happy for you not to pay it back if you trade up - they might mean exactly what they say. Make sure everything is clear now to avoid heartache in the future.

Their last term also seems a bit harsh - so if you die and their daughter (grief-stricken over losing her partner) is forced to sell because she can't afford the mortgage by herself, she has to repay the cash rather than use it as a deposit on a smaller place?

haddock_n_chips

Thanks for the reply pinkteapot

I think i understand now,

if this is the case then it will be really simple as deed of trust will state our (as a couples) % of the house ownership

I know its easy to say now and you never know what the future may hold but she has a very strong relationship with her parents.

as you say with point C

i dont think they would expect her to pay it back if i were to die,

I think more of the issue is if we split up and had to sell the house. It's only fair for them to be protected from me walking away with a huge chunk of their money. Not that i would dream of doing that and they know me well and i dont think they would expect it to happen, but for them to legally have their money protected i think would make them happier

Oh the joys of finances and house buying!....

Prothet_of_Doom

My parents had a sum of money to help my sister with a deposit, and they didn't want it to be a gift, as they felt they'd have to give me the same sum to be fair, and they couldn't loan it because of the mortgage people not liking that, so they drew up a deed which basically said that they took 10% share in the house, and when it was sold, after taking off any capital my sister had repaid, they would get 10% of the remaining cash.

Worked quite well for them as they put in £4K and got out £8K. They then gave my sister £4K and me £4K in order to be "fair". Personally, I wish they'd just have given her the £4K in the first place, because I just feel that it's stupid to try too hard with this fairness thing. I used the £4K to help with a loft conversion.