Parents loaning deposit

Mrs_pbradley936

BournemouthHan wrote: »

The trouble is, it is not a gift. I am just grateful that they have offered to loan us anything!

How have people got mortgages before with family loaned deposits?

I thought it was an incredibly common thing to be loaned your deposit by parents but would reduce the amount the bank would lend you?!

They lent my brother £25,000 too and he got a mortgage comfortably - but this was before the new mortgage reviews/interviews came into play.

Is it not allowed any more then? I'm now more confused than ever!

By saying it is a gift! In our case a wedding present. However they split up 4 years later and the gift element disappeared via solicitors arrangements.

BlaEm

If your parents trust you, they will gift you £25,000 and you will give them a monthly gift of £140 cash for the next 15 years...

Make sure the reference on any bank transfer doesn't use the L-word, as well, as you may need to show your solicitor bank statements with proof of deposit.

kingstreet

You either use a lender which requires it to be a gift and your parents will be asked to sign a disclaimer that it is a gift, non-refundable and they will take no interest in the property.

Which will of course be a lie.

Alternatively, you approach a decent whole market broker who will place the case with the correct lender, or at least tell you the terms on which a loan can be accepted and you actually do it honestly.

Your call.

princeofpounds

Listen to Kingstreet - he knows what he is talking about on this subject.

It's up to you if you want to lie to your lender or not about the status of the loan.

Personally I wouldn't, not just because it is mortgage fraud, but also because it puts your parents in the difficult position of signing away their claim to the loan.

xylophone

http://www.totallymoney.com/guides/buying-with-parents/
might be of interest?

Another_username_2

Indeed, listen to what Kingstreet says.

We loaned partial deposits to both our sons with the Britannia BS, which happened to be offering the best rates at those times. The possibility of taking a second charge on their properties was well hidden in the depths of their web site, and the branch people we dealt with didn't know anything about their "family equity" scheme until they spoke to the head office but once they understood what it entailed they were very helpful. There were some additional expenses involved as we had to pay for our own formal legal advice (as if we couldn't read a simple loan contract ourselves!) but we now have second charges over each of our sons' properties. Together, we put together 25% of their valuations, which allowed our sons to get 75% mortgages and low borrowing rates.

Britannia is not alone. At the time we did this I identified several brokers who specialised in "family equity" and similar mortgages. You may like to look for one of those specialists although I suspect that, as kingstreet says, any whole-of-market broker would be able to help you locate offers

There is also the possibility of a family member either placing cash on deposit with a lender, linked to the loan and effectively acting as a guarantee, or accepting a charge on their own property (so no cash needed) on a similar basis. A quick Google confirms that National Counties BS has recently set up an offshoot to deal in these mortgages as the "Family Friendly BS" and Barclays and the Woolwich have both set up similar schemes under the "Family Springboard" banner. There are surely others.

So there are lots of options which don't involve the risk of saying that a loan is a gift.

BournemouthHan

We have no intention of lying. That's why I wanted some words of wisdom! If the banks will lend us less money because of the loan, then so be it. My concern is outright rejection! I'm glad there are some lenders it is a possibility with.
Having said that, mum and dad said that they are happy to gift us the money in order to have it returned when the house is sold on. This is a possibility. They will write a letter to that effect for us.
We will meet with a broker in the new year anyway to look at the best options for mortgages for us. We're just concentrating on getting our finances in order until the new year and saving as much expendable income as possible for a deposit (not easy with christmas around the corner!)

Thanks everyone for your help and advice. It has helped very much.x