Parental help with house deposit, but not sure what option to take?

greensalad

My partner and I are looking to buy a house, in the range of around £275,000.

Because the deposit needed for such a house is so high, my Dad has discussed with us his help to get us on the ladder. However my Dad wants to earn money, not just "help". We need a way that he can earn some money from the venture too, as an investment.

He currently has around £150k that he would like to invest in property. He is not concerned with rental or regular income, but he wants to purchase a property in order to gain the inflation when the house is sold.

I have dicussed him going in with us on buying a property. Me and my partner own half, he owns half, with an eventual plan that we would buy him out of his half, at the increased property value, so he will have made his money on the venture.

I'm looking into it and it seems there are a lot of options:

- He "gifts" us £150k, we add £15k to it and essentially put down a £165k deposit. At 40% LTV I'm guessing we shouldn't have a problem securing a mortgage, and looking at the repayments I would think we could overpay the mortgage and repay within 10-12 years. That would then allow us to take out a new mortgage to buy him out of his half. However that hinges on him "gifting" us the money, and I understand if he's not comfortable doing that. If we laid out to the mortgage provider the plan, and that the money would be repaid to him one day, would that negatively affect our chance of being granted the mortgage?

- Lloyds Lend a Hand or similar - to me this seems like the H2B scheme but with a parent's investment instead of from the gov. However I can't see how any money is "made" on the parent's investment at this point? The website doesn't give much information.

- Any other options?

DigForVictory

If he wants an investment, he should leave family right out of it.
He doesn't want to gift you any money? Fine. Cut your coat according to your cloth & let him invest where he chooses.

If this means you're the proud owners of a damp shoebox in the back end of somewhere, that at least means you're not tied or beholden to him, your relationship is entirely your business as in as, as is any fencing, roofing, property maintenance etc.

Ordinarily parents want to help. Your father's plans do not sound overmuch like the usual help.

Get a halfhour with a solicitor & outline the possibilities. When you see a professional turn a nasty shade of grey-green, you may see just why doing business with family is generally held to be a bit fraught.

greensalad

I don't really see the problem with it morally?

The issue came up as I was discussing with him how it was very difficult for us to buy a property as our rent is so high, that it would take many many years of saving for us to get a deposit, and by that time the house prices would have increased even more. My partner works a specific job only available in two locations in the country, so we can't really live anywhere that has properties for what we can afford at present.

If we presume that the money was not given as a gift and instead was used to purchase half of the property, would that not be allowed? I have seen other threads discussing purchasing properties with family and it seems that it's fairly common?

It seems like a win-win to me, if we can make it outlaid and agreed to legally. We get an investor that we would never normally be able to, he invests in property just as he wants.

Tixy

You say that you have discussed

Me and my partner own half, he owns half, with an eventual plan that we would buy him out of his half,

But then don't list that as one of your options.

So another option would be to own the property between the 3 of you (as tenants in common at an agreed percentages or some other split). You would all need to be listed on the mortgage (and depending on his age this could limit the mortgages available to you).

With any option do consider all the possibly outcomes, e.g. what happens if he needs the money returned at a point that you are unable to get a mortgage on your own?
What happens if you are unable to keep up payments on the mortgage or what happens if you are declared bankrupt/ he is declared bankrupt etc.

Definitely take professional advice on something like this and discuss with the advisor the potential pitfalls.

bris

What happens if you split with your partner, that gifted deposit becomes half his that's what.


You need to think carefully before you ask your dad to "gift" 150k as he has no legal right to it back if anything goes wrong.

RichardTheComic

This is complicated. He'd need to 'gift' you the deposit for the bank to accept it. Therefore, I'm not sure what legal documentation you'd need to provide for him to have any stake.

Why don't you buy a house with your dad named on the mortgage. You could have a tenants in common agreement with him that'd show what stake he put into house. Many banks will accept more than 2 people named on a mortgage.

greensalad

Thanks for the replies.

As you say, the option of him being part of our mortgage and not "gifting" but rather contributing to the deposit in his own property is exactly the point I was trying to make in the second half of option one. I think I worded it poorly.

I read that "gifts" are more likely to be accepted by mortgage providers.

I wanted to know if a "non-gift" would be accepted by a mortgage provider, and if me and my partner could have a chance at having the mortgage exclusively in our name, but with my father owning the "unmortgaged" half of the house, if that makes sense.

Tixy

greensalad wrote: »

I wanted to know if a "non-gift" would be accepted by a mortgage provider, and if me and my partner could have a chance at having the mortgage exclusively in our name, but with my father owning the "unmortgaged" half of the house, if that makes sense.

The mortgage would be on the whole property, and anyone of the deeds of the property needs to be listed on the mortgage.
Because a mortgage company cannot repossess half a property.

You could speak to a mortgage broker, or try posting on the mortgage board, to see what might be possible in terms of a mortgage if he lends you the money and doesn't own the property.
You'd at least then have a clearer idea before speaking to a solicitor/advisor.