Should my dad lend me £10k so that I can afford a house

Jox

http://www.totallymoney.com/guides/buying-with-parents/

I think that just refers to inheritance tax if your parent dies within 7 years of gifting you the money (see guide attached).

deejbk01

GwylimT wrote: »

Ah yes, silly me!

Still though, OP if you have spare money to pay a loan, where is all this spare money that you haven't needed to spend in the last few months or maybe years?

Well it's trickling into savings towards a deposit. However at the same rate my savings increase, the prices of properties increase. I've been £10k short for nearly two years, even with saving a good amount each month. It's like trying to catch someone who's equally fast as you and has a headstart

AnotherJoe

AFAICS the repayments over 4 years would be £222 a month. Can you afford that?
That is if M&S would loan that amount to your dad at that interest rate.

You'd have to lie on your mortgage application and say it was a gift from your dad rather than a loan. Your dad might have to show where his money came from. And then it woudl be clear you were committing fraud.

So it would be better if he just 'gifted' you £10k out of his savings directly, rather than get a loan from a third party for it, (If you still want to lie on the form, lets be clear plenty do this) and then you informally paid him back. FWIW if you paid him back at the same rate, 3.3% he'd be getting better interest than he's probably getting on it now.

foxy-stoat

Ask your Dad to apply for the loan and see what rate they give him first....I would be interested to see if he gets the lowest rate for the purposes of gifting it to their Son for a deposit.

Once he is offered a rate of 7-9% then revisit this idea to see if its affordable.

Thrugelmir

deejbk01 wrote: »

Well it's trickling into savings towards a deposit. However at the same rate my savings increase, the prices of properties increase. I've been £10k short for nearly two years, even with saving a good amount each month. It's like trying to catch someone who's equally fast as you and has a headstart

Opened a Help to Buy ISA?

deejbk01

AnotherJoe wrote: »

AFAICS the repayments over 4 years would be £222 a month. Can you afford that?
That is if M&S would loan that amount to your dad at that interest rate.

You'd have to lie on your mortgage application and say it was a gift from your dad rather than a loan. Your dad might have to show where his money came from. And then it woudl be clear you were committing fraud.

So it would be better if he just 'gifted' you £10k out of his savings directly, rather than get a loan from a third party for it, (If you still want to lie on the form, lets be clear plenty do this) and then you informally paid him back. FWIW if you paid him back at the same rate, 3.3% he'd be getting better interest than he's probably getting on it now.

Yeah I can definitely afford that. In fact although I've stated the interest payment on the loan would be £600, adding this additional £10k to my deposit would take me from 5% LTV to 10% LTV. This cuts the monthly payments by about £100 for the same 2 year fixed mortgage, so I'm sure this £600 would be far offset by saving in interest over the 40 year term of the mortgage. Though I've not done the maths.

Why would I have to lie on the mortgage application? We could agree that the £10k was a gift and my dad write a letter to that effect to present to the lender, any subsequent funds I send him thereafter would be discretionary, and not bound by a contract etc. I.e informally paying him back.

I don't have a problem declaring where my dad had obtained the money, would that be something that would stop the lender from lending to me? As I'm not liable for the repayment I can't see how it would.

GwylimT

deejbk01 wrote: »

Why would I have to lie on the mortgage application? We could agree that the £10k was a gift and my dad write a letter to that effect to present to the lender, any subsequent funds I send him thereafter would be discretionary, and not bound by a contract etc. I.e informally paying him back.

I don't have a problem declaring where my dad had obtained the money, would that be something that would stop the lender from lending to me? As I'm not liable for the repayment I can't see how it would.

You're lying (applying for a mortgage fraudulently) as you are claiming the money is a gift, as you will be paying the money back it is not a gift, it is a loan. The fact that a loan has been taken out and given to you is a huge suggestion to the lender that it isn't a gift at all.

AnotherJoe

deejbk01 wrote: »

I don't have a problem declaring where my dad had obtained the money, would that be something that would stop the lender from lending to me? As I'm not liable for the repayment I can't see how it would.

It would. Don't do it.

SavingSteve

Plenty of people do this. It can go wrong, as according to the banks you can't afford the additional payments, otherwise they would've lent it to you.

Personally, if I were you I would be able to look myself in the mirror on this one. At the end of the day, If you don't pay the loan payments your Dad is on the hook. Not saying you should shift him, more that you are not lying per se, as contractually (although not morally) you have no obligation to repay him.

People being far to negative here.

Mojisola

deejbk01 wrote: »

I am about 10k short of buying a house in the area I want to live in

Isn't the real answer to find a house in an area that you can afford to live in?