Deposit Loan vs Gift

00sacha

Hello, I'm a FTB and have been saving for a deposit for a long time. I recently found a house I loved a lot sooner than planned and my offer was accepted. I had a shortfall on my deposit of £4500 (I've saved £15,500). My parents explained they could give me the money and agreed to transfer it to me. Now from what I've read it's better as a gift, and they are more than happy to sign documents agreeing that. However this morning I realised they had transferred it and named the transfer 'Loan'
I'm meeting my Broker tomorrow to run through the application and I'm sick to my stomach that this has screwed everything up. I'm scared the mortgage company will think I'm lying about it being a gift and not sure where to go from here. I'm even considering pulling out.... Can anyone offer any advice or had a similar situation? Thanks so much

alchemist.1

It needs to be a gift rather than a loan.

Why did your parents make it down as a loan? It really does seem like you are lying to a potential lender.

HappyMJ

00sacha wrote: »

Hello, I'm a FTB and have been saving for a deposit for a long time. I recently found a house I loved a lot sooner than planned and my offer was accepted. I had a shortfall on my deposit of £4500 (I've saved £15,500). My parents explained they could give me the money and agreed to transfer it to me. Now from what I've read it's better as a gift, and they are more than happy to sign documents agreeing that. However this morning I realised they had transferred it and named the transfer 'Loan'
I'm meeting my Broker tomorrow to run through the application and I'm sick to my stomach that this has screwed everything up. I'm scared the mortgage company will think I'm lying about it being a gift and not sure where to go from here. I'm even considering pulling out.... Can anyone offer any advice or had a similar situation? Thanks so much

If it's been marked as a loan then it's going to be difficult trying to claim it's a gift now.

So...how much do your parents want each month. The payment you make will reduce your affordability but paying £4,500 over 10 years is only £37.50 a month so it shouldn't affect you too much.

I personally wouldn't worry about it.

I'd get your parents to write up an agreement saying it's to be repaid over 10 years with no interest to be charged.

As most of your deposit is savings and you can usually only pick one option as the source of your deposit then selecting savings would be fine.

alchemist.1

I would have thought by providing a loan, the parents will end up with a financial interest in the property and most lenders wont accept that.

HappyMJ

alchemist.1 wrote: »

I would have thought by providing a loan, the parents will end up with a financial interest in the property and most lenders wont accept that.

To get a financial interest in the property they would need to be on the title. The mortgage company won't allow that.

marksoton

HappyMJ wrote: »

To get a financial interest in the property they would need to be on the title. The mortgage company won't allow that.

Most lenders ( and solicitors) will insist on an unequivocal statement of no interest etc... on any deposit.

And that means no "loans"

00sacha

thanks for the replies. I should add it's my mums money which she was gifting us, however she doesn't deal with any of my parents banking and my Dad is the one that stupidly wrote Loan on the transfer. My mum is livid and doesn't know what he was thinking. I've emailed my broker for advice so I guess I'll have to wait and hear back.

HappyMJ

00sacha wrote: »

thanks for the replies. I should add it's my mums money which she was gifting us, however she doesn't deal with any of my parents banking and my Dad is the one that stupidly wrote Loan on the transfer. My mum is livid and doesn't know what he was thinking. I've emailed my broker for advice so I guess I'll have to wait and hear back.

What would happen if you repaid it and borrowed more on the mortgage instead?

00sacha

That's what I've just been considering. My repayments would be higher but still within affordability so all is not lost right now. I'm going to meet the broker tomorrow and discuss it it more detail. Thanks

CathA

00sacha wrote: »

thanks for the replies. I should add it's my mums money which she was gifting us, however she doesn't deal with any of my parents banking and my Dad is the one that stupidly wrote Loan on the transfer. My mum is livid and doesn't know what he was thinking. I've emailed my broker for advice so I guess I'll have to wait and hear back.

Why don't you transfer it back to your parents and then get your parents to transfer it without the word "Loan" on it?

pollydollydoodah

Can they transfer another 5k and put gift on it...then give back the "loan"(&Mark it as loan returned") and explain it was a loan of 10k....5k and gift of 5k but you only needed 5k