Gifted deposit letter confict with a deed of trust.

rob_hoyle

Hello, I have already posted in the house buying section but wanted to try in here with a more appropriate title.


We were set to buy a house, me providing half the value in cash via a loan from my dad, my friend the other half via a mortgage with only his name on it.
We were told its common and a deed of trust would be needed. Which would state he legally held the property in trust of the both of us. But our conveyance solicitor has informed me the bank will ask me to sign a gifted deposit letter. This was not mentioned by the mortgage advisor. But the letter will apparently state I am gifting him the money (half the value of the house) and hold no interest in the property.
It just seems to me that the deed of trust and the gifted deposit letter are saying opposite things, since although I wont legally own the property when we do sell in years to come I want 50% of the value and the deed of trust would state we are tenants in common.


If anyone can offer advice I would appreciate it as this is keeping me awake at night and I'm panicking its all going to fall through, since I don't imagine my dad would lend me the money, be in debt to him and then legally give that money away with no assurance of getting it back.


Thanks in advance

davidmcn

Has the lender been told it's a loan or a gift?

YHM

Are you not going on the property deeds?

Tom99

[FONT=Verdana, sans-serif]You need to be a legal owner on the deeds and therefore also on the mortgage.[/FONT]
[FONT=Verdana, sans-serif]It would be a joint mortgage and your loan/repayment would be taken into account when accessing your joint affordability.[/FONT]

rob_hoyle

The lender was informed that my portion of the funds was a loan.


I wasn't going to be on the deeds due to not been on the mortgage, believing I was not able to get a mortgage, however I wasn't aware of joint mortgages only taking into account one persons earning at the time. Plus the estate agent and mortgage advisor said this was common.


I will be trying to arrange a joint mortgage assessment as soon as the advisor returns next week.


Thank you all for your replies.

rob_hoyle

I just want to add this deed of trust scenario. Which I believe is applicable to us. Cant post links so will copy and paste the info.


Buying jointly with one party on the legal title.


John and Sarah are purchasing a property jointly, however, as Sarah is still a student she does not have a sufficiently adequate credit rating to be able to be party to the mortgage and thus the title, she has however saved enough for her share of the deposit.
In this situation a Deed of Trust can be used to good effect. The deed would show that the legal title of the property is held in John's sole name in trust for the benefit of both John and Sarah, this is how a trust instrument is typically used. John and Sarah can also specify the proportions in which each of them will hold the property (as Sarah will be contributing more) and in what proportions each of them will be liable to contribute towards the running costs of the property.
Sarah was also worried about her ability to recover her contribution in the event that her and John ever split up. The deed can specify under what circumstances the property is to be sold. For example if John and Sarah decide to end their relationship and one party moves out, either party can serve a sale notice on the other informing them of their wish to buy the other party out. If this cannot be decided then the deed has provision for the property to be placed on the open market and the proceeds then dispersed according to the provisions of the deed. This is a general overview of the way in which the deed works, each deed and each situation is of course different and our deeds are drafted accordingly to cater for each client's specific needs.
In this situation as John would be the sole legal owner of the property a Form A Restriction would need to be placed on the title to the property in order to ensure that one party (namely John) could not sell the property on his own even though he was the sole legal owner without appointing a second trustee to accept any sale monies. See our FAQ Section for further information regarding Form A Restrictions.


The obvious difference been we are not a "couple" in any sense.

Kirtle_Dove

Hi folks

I have a similar issue for which I am seeking some clarification! Am planning to talk to financial advisors very soon, but thought I would ask here first!

My partner and I are buying a house with my mother - all three of us will live there. She (my mother) has sold her house and has a lump sum to donate, in the best way possible that will protect and support all of us. We have a mortgage 'decision in principle' in place to make up the rest of the house price. Our original plan was for my mother to 'gift' us the money as a gifted deposit, but her advisor has said that that would not be the best course of action, and that a 'declaration of trust' would be better - which would effectively put her on the mortgage. However, our motrgage lender does not give mortgages to people over 75 and my mother is 83!

Does anyone have any knowledge / experience in this area? Obviously we have to do the best thing to protect all three of us from divorce, bankruptcy and death issues that would affect the others.

Any advice gratefully received - I am way out of my depth already!

Thanks

Tom99

Kirtle_Dove wrote: »

Hi folks

I have a similar issue for which I am seeking some clarification! Am planning to talk to financial advisors very soon, but thought I would ask here first!

My partner and I are buying a house with my mother - all three of us will live there. She (my mother) has sold her house and has a lump sum to donate, in the best way possible that will protect and support all of us. We have a mortgage 'decision in principle' in place to make up the rest of the house price. Our original plan was for my mother to 'gift' us the money as a gifted deposit, but her advisor has said that that would not be the best course of action, and that a 'declaration of trust' would be better - which would effectively put her on the mortgage. However, our mortgage lender does not give mortgages to people over 75 and my mother is 83!

Does anyone have any knowledge / experience in this area? Obviously we have to do the best thing to protect all three of us from divorce, bankruptcy and death issues that would affect the others.

Any advice gratefully received - I am way out of my depth already!

Thanks

Sounds like your mother's advisor is trying to protect your mother's financial interests.
You don't give any figures but lets say your mother is paying 1/3rd of the house in cash.
You would all be legal owners of the house and hold it on a deed of trust where on sale the net proceeds are divided:
To your mother - 33% of the gross sale proceeds
To you - 50% of the remainder
To you wife - 50% of the remainder

The two main problems are that most mortgage co's would not accept a 83yr old as a mortgagor.
The second problem is how would your mother get her money back if she needed it, care home fees say.

Speak to your mortgage advisor, you may find a mortgage co who can arrange something.

Another way might be for you and your wife to become the legal owners but for you to hold the property on trust for the three of you in the same proportions set out above.
Another way might be for your mother to loan you the money, with if possible a 2nd charge on the house.
However a mortgage co may well object to both of these methods if they were consulted.

One of the other issues to have in mind if you are forced back to the gifted deposit route is your mother's IHT liability. Since she would be retaining benefit of the gift by occupying the house with you, the gift could be caught by 'gifts with reservation' and the amount remain in her estate or, if you escape that, Pre-Owned Assets Tax.