Gifted money for debt repayment, rather than deposit

monkeysrevenge

Hi all,

Related to (but not the same as) another thread I started re paying off debts with equity when buying a new house...

We have had an offer from one of or parents to pay £5k off a £15k debt to help us with affordability on a Natwest mortgage. My quick question is, would this be viewed in the same way as a gifted deposit I.e. Would they need to sign anything? Or because it's paying a card off would it not matter?

We do intend to repay this to them in the coming year, and the offer came about because the completion date on the new build we like is potentially slightly earlier than originally advised, so not all our debts would be repaid on completion otherwise (as our mortgage offer states must happen).

Also, does anyone have experience dealing with Natwest and them checking debts have been repaid as promised? We fully intend to and can 90% likely afford to pay it all off, but in the case we can't, are they a stringent lender in checking?

Thanks

Thrugelmir

If the debts are sizable then the solicitor could be instructed to settle them directly from the proceeds of the sale. Otherwise you could simply walk away with the cash if left to your own devices. Borrowers consolidating debt often require careful management.

csgohan4

it isn't a gift as you intend to repay your parents, your replacing 5k of debt with 5 k of debt interest free from your parents.


Question is can you afford the mortgage with that much debt and will you be able to stop getting into debt in future?

foxy-stoat

I would of thought it wouldnt matter as they will make payment from their bank account to your credit card account directly, as long as your credit card company accepts the payment.

Whether you tell the lender that you have borrowed £5,000 to pay some of your debts off is upto you - you could of done or going to do £5,000 worth of gardening work or they just remembered that they took £5,000 out of your savings account when you were 9 years old and only now are they paying it back. If you can afford to pay them back then do so.

AnotherJoe

OP as long as they intend it to be a gift, seems to me there's nothing to declare, its not your deposit, its lowering a debt, you'd report a £10k debt instead of a £15k debt. As suggested by another poster get them to repay it directly.

Should you at some future date decide you'd like to repay them that's a different matter.

Thrugelmir

AnotherJoe wrote: »

OP as long as they intend it to be a gift, seems to me there's nothing to declare, its not your deposit, its lowering a debt, you'd report a £10k debt instead of a £15k debt. As suggested by another poster get them to repay it directly.

Sudden movements close to applications will trigger an uncertainty. As the money has come from somewhere. Potentially a family loan.

Phil_H_MLIA(dip)_Cert_PFS

"intending to repay" is not the same as having a loan. It has no bearing on the mortgage unless of course they at some point are hard up and that in turn places you under pressure.

MortgageMamma

Natwest have no problem with gifted deposits or loans from parents so I can't see it being an issue but SPEAK to them - they will have the right answer for you, not this forum - nobody here can answer for NatWest. its best to check and not make assumptions, as assumptions are the mother of all duck ups.

AnotherJoe

Thrugelmir wrote: »

Sudden movements close to applications will trigger an uncertainty. As the money has come from somewhere. Potentially a family loan.

Why would it be a sudden movement? Instead of declaring they owe £15k they'd declare they owed £10k. There wouldn't be a change.

monkeysrevenge

Hi, thanks all for the responses.

Firstly, to clarify a comment in my OP, I mentioned "as the offer states" in terms of repaying debt on/before completion. I should have said "as our offer would state" as we are yet to submit a full application. Apologies for the mis-type.

We received a "referred" decision on our DIP with Natwest due to a late CC payment by my wife in Feb 2010, relating to which there is a "notice of correction" on her file. We got a mortgage in 2013 with this on file so I'd think if this is the only thing that's held up a DIP, we're in pretty good nick?

Our debt is currently manageable - all except 1 small loan is on 0% cards. Monthly outgoings for these are extremely low (£200 min repayments) and we regularly have £1k left over after all fixed commitments and a few hundred quid for expenses here and there. Earliest 0% doesn't expire until Jan 17 and if we didn't move, our budget would see is pay this off in July 17 in full.

As a note, we did not intend moving or applying for a mortgage this soon, we just saw a new-build house on an estate near us for sale and thought we'd go for it while the opportunity is there. The chance to move to what would be our "forever" home is one we want to jump at!

We would not be getting into further debt on completion - we got married, had a (very nice) honeymoon, re-decorated the house, bought furniture and replaced the bathroom in the last 18 months. We wouldn't be doing any of that again(!!) and we hate the amount of debt we have, so that will stop us in future.

Also, as part of our deal, we have had an offer from the builder to pay the stamp duty on our new build. Do lenders ever check the source of costs like stamp duty, conveyancing, removals etc. on top of the deposit / equity funds at full application stage?

Thanks again for all your feedback - it's very much appreciated.