Mortgage Deposit - can it come from a loan in my partner's name?

moldypeach

Hi there My partner and I are very close to putting an offer in on a flat - currently deciding between 2. We have been given a mortgage promise from the bank (Lloyds), which is based on it being a joint mortgage.


Long story short we do not currently have the full deposit - we had been aiming to raise 5%, as the mortgage advisor (wrongly) told us we could get a 95% mortgage under government scheme (sorry, forgotten the name of said scheme!). The second time we spoke with him, he informed us he'd got it wrong and that the most we could get is 90%. (He also told us we could get the equity loan scheme, which was also wrong and was only pointed out to us by the financial guy at the estate agents!) Anyway, I digress.


We originally had saved up that 5% deposit and had narrowed it down to these 2 flats, only to find out we need to provide 10%. We can get some of the shortfall from family, but not quite all of it in the timescale we need - we'd be short around £3,000.


We are wondering whether we could instead go for a sole mortgage application in my name - my earnings are the highest (£21k per annum, partner's is £6k working part time). This shouldn't drop the amount we could lend below what we need to buy either flat. My partner would then take out a personal loan, and "gift" me that money towards the deposit.


Would this work? On my earnings alone we could still afford the mortgage repayments, and he could repay the loan, albeit over some time.


My question is, would this be acceptable to the bank? Other than wanting to know where the deposit has come from i.e. gifted from my partner, do they also need to know where he got it? And if so, would it matter if its from a loan when you take into account that I'd be applying as a sole application and the loan would not technically be connected to me in any way?


Its not the majority of the deposit, just enough to cover the shortfall. We could afford to pay it back together with the mortgage payments. It seems a simple way to get around this, on the face of it. We love these 2 flats and are really keen not to lose out on one of them. For reasons too long and irrelevant to go into, we do have a time limit as far as buying and moving in is concerned (current accommodation coming to an end shortly, in a nutshell).


Many thanks for any input!

Thrugelmir

Straightforward answer to your question is no.

kingstreet

Why try to force yourself into the square hole of a lender which has misled you and for which you are now trying to bend things so you'll fit?

Why not talk to an independent broker and get what you actually want, a 95% mortgage? You'll probably get a better rate too...

Your loyalty is all a one-way street.

exoteric

As Thrugelmir says, this wouldn't work. The purpose of a deposit is to show the lender you have your own funds to put towards the purchase, but if you did this you would effectively be financing the whole mortgage with debt which has to be repaid.

You would also be misleading the lender - why else drop your partner from the application other than to hide where the funds have come from? The lender would almost certainly start asking questions about why your partner, who would be living with you in the property, won't be on the mortgage or the title deeds and yet has the deposit funds to gift to you. Your partner would also be in a very weak position legally speaking, having gifted the loan funds to you which he would still have to repay whilst effectively having no legal interest in the property.

Why don't you try a different lender? If Lloyds won't give you a 95% mortgage (I presume it's Help to Buy), you may still be able to get one with a different bank. As kingstreet says, get yourself a good independent broker (some are even fee-free) on the case ASAP as they may be able to point you in the direction of the right lender.

Have you also factored in all the other costs of buying a home, like stamp duty, solicitors' fees, valuation/survey etc? Technically, you will only need to pay the valuation and searches up front and should not need to pay the stamp duty and solicitors' fees until later in the transaction, so that may give you a bit more time to save or get funds from family.

But ultimately, I would say that if a £3,000 shortfall is causing this much of a problem you may be trying to do things before you are ready and/or over-extending yourselves. Perhaps the best thing is to let this property go, keep saving and get yourselves in a better position to try again in the new year. Good luck!

TrixA

If you're both going to be living in the property and sharing responsibility for the mortgage, the bank will expect to have you both on the deeds.

moldypeach

Thanks for the responses


For curiosity's sake, isn't this not much different to borrowing money from your parents, which is really common for first time buyers? Its not the entire deposit, the majority of it is our own money so we won't be financing the entire mortgage with debt. If we were making up the shortfall with money borrowed from family it would be less frowned on. Is it something to do with the fact that my partner would be living at the property also, as opposed to family who have 0 interest in it at all?

kingstreet

Borrowing money from anywhere is an issue.

Lenders are looking for relatives to sign confirmation letters saying the money is a gift, not a loan.

exoteric

kingstreet wrote: »

Borrowing money from anywhere is an issue.

Lenders are looking for relatives to sign confirmation letters saying the money is a gift, not a loan.

^^ This. Also, money from relatives is very different to a loan from a bank - your relatives will be more flexible with repayments (if any) and are unlikely to seek a CCJ if you don't pay them.

Thinking outside the box, and I wouldn't recommend doing this, but the only thing which *could* work is if one of your parents was prepared to take out a loan and then gift the money to you and your partner to then apply jointly. Then you can legitimately say the source of the funds is a gift from family. However, you will need to factor in repaying that loan as well as your mortgage and it might just be best to wait until you've got enough saved up to proceed.

moldypeach

Hmm ok thanks


A final question, if I may - at what point does the deposit need to be provided? I.e. do you need to have the full deposit at the time of applying for the mortgage? If we had more time, we could continue saving our own funds while the whole process is going on.


We are first time buyers so really all of this is completely unknown. It would be ideal if we could go to a proper broker but we can't afford more fees!

kingstreet

moldypeach wrote: »

Hmm ok thanks


A final question, if I may - at what point does the deposit need to be provided? I.e. do you need to have the full deposit at the time of applying for the mortgage? If we had more time, we could continue saving our own funds while the whole process is going on.


We are first time buyers so really all of this is completely unknown. It would be ideal if we could go to a proper broker but we can't afford more fees!

Proof of deposit will sometimes be requested by the lender at the outset, or by the solicitor during the process.

Looking at Mortgage Brain, Lloyds cheapest 95% mortgage is 5.19% and the product fee is £995. Valuation fee is on top, based on purchase price.

Best product is 4.75% with no product fee. My fee is £250, so you are £745 and 0.44% per annum better off. Possibly more as I suspect my product will have a lower valuation fee.

Still, Lloyds isn't going to give you that 95% mortgage so not much point comparing it, is there...?

moldypeach

...What is the best product? Or if you have a link to the comparison site, that would be great


We're not entirely closed off to looking elsewhere, if a 95% deposit may be possible.