Employer Lending Mortgage Deposit

ksjohnson

My wife and I are just about to become debt free (after for a wedding, child and car in the past couple of years) and start saving for a deposit. We earn decent money and can save around £1400 per month.


My employer, whom I have worked for for 6 years and anticipate being here a long time, has offered to lend me the £20-£22k deposit that we are planning to save as a fixed interest loan in order to buy our house quicker. They have been very generous, looked into it for us and confirmed they can lend it is with payments over 24 or 36 months.


They believe I can just tell the lender it is a gift from the family. However looking into this, it seems it is not that easy and that lenders will want written statement from the gift giver that we are not paying them back.


If we got a mortgage, we could pay the loan and mortgage easily, and save money not paying rent in the meantime.


- Is there a mortgage provider who will not look into the gifted element?
- If we just have the money sitting in our account, do we need to declare it at all? Can we just say it is savings?
- Is it fraud if we don't declare the loan?
- Will there be mortgage providers who will be happy if we declare it and lend us money anyway (we have good credit scores)?


Any help very much appreciated!!

libf

You need to declare that it is a loan, and apply to lender who will accept this (broker can help with this). They will then factor the loan payments into their affordability calculations when decided whether to lend to you.

You will also need to supply details of the loan to the solicitors acting for you because they carry out money laundering checks.

Thrugelmir

Don't even consider making a fraudulent application. Will cause you considerable long term damage.

fierystormcloud

ksjohnson wrote: »

My wife and I are just about to become debt free (after for a wedding, child and car in the past couple of years) and start saving for a deposit. We earn decent money and can save around £1400 per month.


My employer, whom I have worked for for 6 years and anticipate being here a long time, has offered to lend me the £20-£22k deposit that we are planning to save as a fixed interest loan in order to buy our house quicker. They have been very generous, looked into it for us and confirmed they can lend it is with payments over 24 or 36 months.


They believe I can just tell the lender it is a gift from the family. However looking into this, it seems it is not that easy and that lenders will want written statement from the gift giver that we are not paying them back.


If we got a mortgage, we could pay the loan and mortgage easily, and save money not paying rent in the meantime.


- Is there a mortgage provider who will not look into the gifted element?
- If we just have the money sitting in our account, do we need to declare it at all? Can we just say it is savings?
- Is it fraud if we don't declare the loan?
- Will there be mortgage providers who will be happy if we declare it and lend us money anyway (we have good credit scores)?


Any help very much appreciated!!

Just be honest about your employer lending you the money!

Why would you want to lie?

What a great employer by the way.

Hope everything goes well for you and your family.

mrginge

Are there any BIK implications that HMRC need to be aware of with regards to a loan from an employer?

ksjohnson

mrginge wrote: »

Are there any BIK implications that HMRC need to be aware of with regards to a loan from an employer?

They looked into it and apparently if they provide the load for a fixed period with a fixed rate, HMRC are happy with it without incurring any tax / BIC

marksoton

ksjohnson wrote: »

They looked into it and apparently if they provide the load for a fixed period with a fixed rate, HMRC are happy with it without incurring any tax / BIC

They also told you you could declare the loan as a gift from family....

amnblog

Finding a Lender that will accept a loan as deposit is tricky and you will need a mortgage broker.

ksjohnson

Thanks all for your advice.

A final all encompassing question - if you were in my position what would you do?

Try and get a mortgage with this loan (it would be on a 3% fixed repayment term over 24 or 36 months) or just save for 18 months whilst continuing to pay £700 rent?

I'll be going to a broker after the advice given but would be interested to see what experts would do.

Thrugelmir

You haven't said how much you wish to borrow. Potentially the loan repayments could equate to the rent you are currently paying. So affordability is the key and finding a lender willing to accept such an arrangement.

What conditions would be attached to the loan in the event of you leaving the Company's employ?

ksjohnson

We would look to borrow £180k for a £200k house worst case. I earn £38k + £3k bonus and likely to rise, my wife £28k. The only debt we have is credit card (£2k and soon to be paid off) plus £4K remaining on my student loan.

Loan terms as below:

Rate of interest used throughout 3.0%

Loan size £20,000 £22,000

Over 24 months 859.62 945.59

Over 36 months 581.62 639.79

ccontractual conditions(pasted from my FD)

We all hope you continue to enjoy a long and successful career with the company, but I would like to add some extended termination of employment clauses to your contract, these being:

- Termination of employment by us be for no less than six months notice.
- Termination of employment notice by you be for no less than the term outstanding on your loan, and in any event no less than six months.
- You must repay the loan in full once your employment with us ends, if it is you that has served notice.
- You must repay the loan over the remaining agreed instalments after your employment ends if it is us that has served notice.
-
The last clause is to protect you from us ending your employment and then demanding a large sum in outstanding loan owed at that time. Clearly there is risk there for us as we could be owed a lot of money by a person not employed by us. That said I don’t expect any of these clauses to come into play but there needs to be a framework to cover worst case scenarios.

Using a loan as a deposit seems difficult in principle, but I think we will be very attractive for a mortgage in 18 months, so surely we can use this to speed things up and stop wasting money on rent? We had a £13k loan for our wedding and paid that off. Plus we're wiping out our credit card debt before saving.