FTB Help to Buy - Complicated Situation

ReformedShopper

Hello! Long time Lurker, first time poster.:) This forum has been invaluable in providing information about the crazy minefield of mortgage applications. Thanks guys!

So, my situation - I am a potential FTB on a salary of £27.5K PA in London. I have identified a potential HTB Equity loan Property of £190,000 and have a deposit of circa £28K

My deposit was gifted to me last year by my ex partner, who will not be living with me in the property. I am very close to putting in my full mortgage application after getting my DIP back in January (which means I have to go through MMR (another potential worry). My question is: Do I need to declare my deposit as a gift, if it has been in my account for more than 6 months?

I am asking because everything I have read so far seems to indicate that gifted deposits can only be supplied by close relatives or a spouse, and my ex is not interested in having his bank statements poured over with a fine comb. He is happy to write a gift deposit letter (if necessary).

Thrugelmir

A gift from a closely related family member is fine. Not from other parties.

Not worth lying.

ACG

At what point does a gift become savings?

How long has it been in your account for?

ReformedShopper

Thanks for the replies

@ACG - Deposit has been in my savings account 6 months, actually mingled in with my own savings, although there was a lull in topping up my savings account until 2 months ago, due to a recent death in the family.

@Thrugelmir - is there any reason why it has to the case. My ex truly has gifted this amount to me, to help me secure my future and does not want this to be repaid in any way/ shape or form. Surely, my ex's reasons are no less pure than a supposed "close relative"?

kingstreet

£190,000 purchase price

£38,000 equity loan

£28,000 deposit

_______

£124,000 mortgage / £27,500 salary = 4.5 x income.

You will have to factor 3% of the equity loan into affordability, along with any ground rent & service charges on top of any expenditure of your own, such as credit, student loans, childcare, travel costs.

I suspect affordability will be a bigger hurdle than the source of the deposit.

I've just run one well-known lender's calculator and allowing £245 per month for the equity loan and charges mentioned, with no credit, no dependents and a 35 year term, you just about make that amount.

This will need very detailed attention.

ReformedShopper

Thanks @Kingstreet, I'm already having massive kittens over affordability right now, to be honest. I don't have any dependents right now, and about £600 on the credit card which can easily be paid off before the I put in the full app. My student loan and my pension payments are taken off my salary at source though, and the service charge and council tax will probably level at £200. Do you think this will be a problem?

kingstreet

Student loan will have to be factored-in, especially if it's on your payslips. Lenders tend to take the largest loan payment in the three months' payslips they request.

ReformedShopper

Thanks again Kingstreet, definitely thinking affordablity is now going to be an issue, as I just read some where that the maximum loan term for any of the the shared equity schemes will be 25 years

Thinking about options now, and now wondering if I should
a)Top up my deposit to 20%? ( I potentially have access to another 10K, which I was going to leave untouched and use as a buffer to offset moving costs, buy furniture, pay service charge and council tax upfront for the year)
b)Remove myself from my work pension scheme (would save me £135 a month)
c)Ask HomebuyAgent to reduce their share of equity loan to 15%

Thoughts anyone?

I really do want this place, as I recognise I'm on the last cusp for any form of home ownership in London on my current salary, and although I am saving and looking at career development, with house prices spiralling out of control, the next time I'll be able to afford somewhere, I'll probably have to live in Watford or something in order to commute, and all my friends and family live in London.:(

kingstreet

You are not limited to a mortgage term of 25 years.

One lender may set that rule, but others don't.

You can put down as much deposit as you like, as long as you borrow at least 25% of the purchase price.

Pension contributions are not deducted from affordability by the HTB - EL lenders we use regularly.

You can't take a 15% equity loan, it's 10% or 20%. As a 10% equity loan will mean a bigger mortgage, this is a counter-intuitive reaction.

You rally should be discussing these issues with your broker. It is a straightforward process to work out what a lender will deduct and how much you can borrow.

ReformedShopper

Thanks Kingstreet,

I initially went direct through my bank, because of some some adverse credit in the past, and the fact that they only checked Experian. I couldn't believe my luck when they said yes and gave me a DIP straight away, following a credit check.

Time to look for a good broker, I guess

My main worry has always been the source of the deposit, to be honest (which is still weighing on my mind)

kingstreet

TBH I'd just throw the lot at a broker and ask them to find you the amount you want from a lender which won't have a problem with affordability or the source of the deposit.

I submitted a PIF to BPHA last week for a case where the purchase will be in one name, but the father of the partner who won't be party to the mortgage/ownership is gifting the deposit money.

So, your broker should be able to find at least one HTB - EL lender which will lend and hopefully, it will fit on affordability.