Second charge / declaration of trust -parent loan?

Fraj1

Hi - be grateful for advice. My son and daughter-in-law are about to buy a house but the mortgage will only be in her name as he has a poor credit rating. The deposit is planned to be a mix of her cash (50k), a gift of 30k from me to my son and a loan of 30 k from me to both of them. One solicitor has advised we should protect the gift of 30 k in a simple declaration of trust showing 50 k was input by daughter-in-law and 30 k by son and the loan by a registration on the deeds. They quoted prices for doing this. When I approached a second solicitor to compare rates they said it couldn't be done as my daughter in law would be signing the mortgage papers to say no one else had any financial interest in the property and my son would also have to sign to that effect making any subsequent document (I. E. declaration of trust and registration) invalid. Who is right?

Someone else has suggested we could simply 'protect' my money by placing a second charge for the whole amount (gift to son and loan).

I really want to help them but feel I need some way of legally registering my input and thus protecting what is in effect part of my sons inheritance. The complication is that he is not on the mortgage or deeds.

Any advice very welcome!
Thanks!

[Deleted User]

Isn't her 50k and your 30k gift enough? Why complicate things further? After all 80k would get them a 25% deposit on a 320 k house/flat etc?

jonesMUFCforever

Well make sure that his name goes on the title deeds if not the mortgage.

Fraj1

The problem is we are told my son cannot go on the title deeds if he is not on the mortgage. She can have a max mortgage of 120k, so with her 50k cash, my 30 k gift and a 30k loan from me they can get a house for 220k. But I am obviously just keen that either I or my son are legally acknowledged as having some asset in the house. They could probably just manage with the 30k gift and get a house for 190k but again I would want some way of acknowledging it as either his or my money. It seems the fact that she is getting the mortgage alone dictates the deeds as well and that a declaration of trust cannot be made when one party is not on the mortgage.

Thanks for your replies thus far!

CLAPTON

in general it is true that lenders require the same people to be on the deeds as on the mortgage.
one can't put a second charge on the house without the permission of the main lender.
how aweful is your sons credit records?
maybe best to approach a lender directly and get their view first hand or maybe try a mortgage broker

JJG

Have your son and daughter-in-law been married for a while? As if they have, would the house become a marital asset and split 50/50 if they were to divorce?

Fraj1

No they are actually getting married in two weeks time so hence will be married by the time they buy the house but only for a few months.

dealer_wins

In the event they split up things could get very tricky and very nasty. Hope you find a solution, your son does need to be protected legally from getting screwed over.

jonesMUFCforever

There is something very wrong here.
There should be no restriction on who goes on a set of deeds, if one particular lender won't lend another will.
What reason could there be for him not to be a party to the mortgage regardless of his credit rating?
Unless he is bankrupt or has committed a previous fraud I don't see the problem because they know that the repayments will be coming from her side.

Pixie5740

There isn't something very wrong here. There are only a handful of lenders who will allow more people to be named on the deeds than the mortgage. Just the same as there are only a handful of lenders who will accept a borrowed deposit i.e. the £30k loan. Does the mortgage lender know that your DIL will be borrowing £30k on top of the gifted deposits?

Are they absolutely sure your son cannot be on the mortgage? Have they been dealing with a mortgage broker or tried to do it alone? Something like the Barclays Springboard mortgage might be worth looking at where you would put £60k in a Barclays savings account so the money would always be yours. Then after 3 years you could take back £30k and then gift the £30k to your son. By then she would probably be looking to remortgage and if he isn't currently named on the mortgage then hopefully in 3 years time he should have been able to get his credit history looking better.

As for the solicitor's advice about people not named on the mortgage having a claim to the property he's probably right. In fact a further complication is that your DIL wouldn't be using a £30k gifted deposit at all because the money will never have been gifted to her although you might be asked to sign something for the lender declaring it is a gift without reservation so you can't then get another document to say you fibbed and that isn't the case at all.

Fraj1

This is very helpful thank you. To answer your questions we did use a mortgage broker who basically saw no problem with the plan and recommended the two solicitors I then approached. I'm not sure if the lender knows about my loan to them. I'm not sure how many lenders the broker tried but the offer he came back with was just for DIL. I'm guessing had he found anyone that would take my son on to the mortgage the rate would have been much higher hence this plan. Yes the plan is indeed to remortgage in 3 years time when his credit history should be clear. It wasn't massive amounts but several smallish ones over several years. Thanks again.