Gifted deposit query

telltale

Hello,

Hoping someone might be able to offer a little advice. I have checked with our solicitor but just waiting for her to get back to us.

So, a little background..........................

My now fianc! (then boyfriend) bought our current home 7 years ago with lots of help from his parents - in fact, they paid for it outright so nor mortgage - we are incredibly lucky!

The house was bought for 153k. The house is solely in my fianc!'s name but at the time, an agreement was made that £50k was a gift that didn't need to be paid back and £100K wasn't ........this was agreed legally and I am not quite sure whether the agreement was that any sale of the property had to be agreed with them before proceeding or if it was simply agreed that the 100k would have to be paid back by my fianc! to his parents.

Fast forward 7 years......we are now engaged and looking for a larger place. Originally we were going to sell, pay back the £100k deposit to his parents, take the now £60k remaining and place as a deposit on a new house. However, his parents then very generously said that we could plough the whole lot into our next purchase. We thus proceeded to up our purchase price and have just had a offer of 280k agreed, for which we will be taking out a 140k mortgage (all agreed in principle) and using the remaining and some savings to carry out some much needed work to the house we are purchasing.

Here comes the problem (or what I think might be one).........we needed a letter from my fianc!'s parents giving us permission to go ahead and sell current home (it is completely in fianc!'s name but as I mentioned we had to have their permission before selling - this was a drawn up legal agreement). So we have just received this and sent to out solicitor but have noticed that fianc!'s parents have said that they 'lift the charge on the property.' They have asked that all the money is carried forward to the next property but have then requested that the charge is re-instated in their favour.

Am I right in thinking that this will cause a problem with our mortgage application as it will not be viewed as gifted but as a loan and thus be factored into our affordability and so the amount we can borrow will be reduced accordingly?

Apologies for the long rambling post but I just wanted to make sure everything was clear.

Any advice gratefully received. Please be kind - first time poster!

Thrugelmir

A very simplistic view. If there's a charge placed on the property then it's not a gift. A gift is without reservation. Lenders won't be agreeable to a charge being placed as makes life difficult in certain situations.

Annisele

I think some lenders might be OK with it in principle if the parents agreed that their charge ranked behind the lender's charge. But other lenders will outright say no, and even the lenders that are theoretically happy may be concerned about affordability.

I think an unusual situation like this is probably one for a broker, unless you're prepared to do a lot of legwork yourself.

telltale

Thank you for your thoughts. You have both sort of confirmed what I thought- that it might cause problems with our mortgage.

I am just wondering though whether the lender would know about it as the deposit is coming from the sale of the house so equity rather than a lump sum paid into our bank account? Anyway I will speak to our solicitor so we can sort it all above board. His parents did say that there is very little chance that they would actually ever want us to repay it so it might be that they just release the charge and trust us that we are not going to run off with the money shd they ever need it! If they did then we cd simply sell up and buy a cheaper house.

Thanks again

Thrugelmir

The issue you face is that the lender has to approve the placing of the charge against the property. As it's a term and condition of your mortgage contract. Therefore not something which can just be done, So you need to discuss this with your inlaws.