Mortgage after repossession and shortfall

Sissy

Hi There,

I wonder if anyone help me with this query or at least direct me to someone who knows these matters.

To cut a long story short due to a series of unfortunate events my wife and I had our property repossessed about 4 years ago. We lost all our equity because of the way the market was and we had a shortfall of 50K. We have never acknowledged or received any mail as yet from the lenders, probably because we are living in rented and had to move various times. Now my question is that I would really like to buy another home for my family and my mother is prepared to lend me 100K as deposit. I read that unless 12 years have passed the lender can still make a charge on your new home or make a forced sale to recuperate his money but that would be my mothers money not mine. My question is, can I put that 100K in my children's name and sort of buy the house with them. Say they fork out 100K deposit and I take a mortgage for 300 or 350K. Is this possible? So that the lenders cannot touch that 100K. I am desperate to buy a home as I am tired of paying rent and having to move house every time the landlord wants his house back for some reason or another. I was also once told that if the shortfall was in both mine and my wife's name the bank would not be able to touch a house that is in soley my name. The person who told me seemed knowledgeable, but then again I read about someone's experience where they had separated and re married and the bank still pursued for the equity in the house with his new wife. Your thoughts and comments on the above would be greatly appreciated.

KRB2725

I don't know the technical answer.

However, common sense tells me that when you are actively trying to avoid paying back money to the last institution that lent it to you, new lenders may be thin on the ground.

Annisele

For a full answer for your circumstances, go and see an independent mortgage broker.

But on the face of it, I think your plan is exceptionally unlikely to work. Even if you'd repaid the £50k shortfall, lenders would see "relatively recent repossession" plus "borrowed deposit", and the majority of them would say "no" on those two facts alone. Add in the fact you didn't pay back the money you borrowed last time, and lenders will be even less likely to want to lend.

If you borrow £100k, that will hammer your affordability. If the money is gifted to you, it will become yours - and it looks like you're trying to avoid that.

I can't see that involving your children will help - unless they're over 18 and have jobs and credit histories of their own? Children under 18 can't hold land, so you'd have to hold it on trust for them. That would complicate the mortgage loan tremendously - possibly to the point you couldn't do it at all. Plus it would cause tax issues.

I'm afraid you're just plain wrong about banks not being able to go after a sole asset for a joint debt. You and your wife will be "jointly and severally liable" for the £50k - which means the bank can go after either of you for the whole of the money, and the bank can certainly go after an asset in your sole name. (If it was a sole debt and a joint asset, things are more complicated than that).

Pixie5740

There are a few spanners in the works.

1) You'll have a problem using a borrowed deposit to get a mortgage. If you try and get round this by saying your mother is gifting you a £100k deposit then she'll have to sign a document stating that it is indeed a gift, and therefore your money and not hers.

2) The repossession and £50k shortfall happened less than 6 years ago so is likely to be on your credit file. Have you looked at all three credit files to see what's on there?

3) How would putting the £100k loan from your mother into your childrens' names help? You still plan on taking out a mortgage and given what you've told us the chances of you successfully applying for a mortgage are slim to none.

By all means speak with an independent mortgage broker but I don't fancy your chances.

Westminster

Also - I would very much expect a question in your full application to any lender along the lines of "Have you ever had a property repossessed?"

You will either:
Try and lie and say no [mortgage fraud]
OR
Say Yes and then will be asked about it - at which point you will have to let on that you still owe 50k to another lender.

Given that you are looking for a mortgage of 300-350k, this would indicate you have a healthy income and are actively avoiding paying a debt you know to be yours.

Would you lend to someone who presented with a case like that?