Use of Mortgage money

ebygum83

Hi to all. I hope the following question is posted in the right forum -
I own a house (well, I own 60 % and am mortgaged for the rest of it).
It's only my name on the title and I live alone without dependants. My dilemma is as follows -
Recently I applied for and got extra borrowing, effectively a second mortgage. That money only came into my bank account a few weeks ago. When I bought the house a relative helped me with a gift of approx. one quarter of the buying price. This was done through a solicitor so there is an official record of it. The idea was that after a few years I would return that gift. BUT, the person giving the gift has hit financial difficulties and needs the gift returning rather sooner than later, (i.e. pretty damn quick).
So, what to do ? I am on good terms with this person and wish to remain so. Their generous gesture helped me and I want to return the gift ASAP. Presently the only way for me to do this is to pass on the mortgage money I received a few weeks ago. ( This mortgage money was mean't for some home improvements but they are not urgent). But is it ok for me to do this, legally ? I am able to repay my monthly mortgage bill without problem and owning more than half the house means if anything happened to me (losing job, illnesses, etc ) the Mortgage money is covered by my equity so no one will lose out. Still, I feel like I might be on the edge of things by suddenly disposing of this new mortgage to pay off the gift. Am I ok to do this ?
Thank you for all/any advice.

financegeek

i'm not sure what the legal / lenders stance would be, but in your position i think i'd feel it was the morally responsible thing to repay the money while the person is in need of it.

as much as i usually think complete honesty should be used when applying for a mortgage, at the time you applied your intention was to use the money for home improvements, however things have changed since then and you now have other priorities.

The only potential pitfall i can see is if you intend to raise more money with the same lender in the future, at which point they may query what works you did with the last funds raised? but I'm not sure how likely they are to refer to the previous application to see what you declared at the time.

Good luck with whatever you decide to do

AnotherJoe

Other than the mortgage fraud being found out* of which the odds are quite low, i cant see a problem with your home improvements being delayed.


* (this self evidently wasn't a gift, it was a loan)

ebygum83

To financegeek , I agree that I need to return the gift and that is my intention.
To AnotherJoe, -I know it looks like a planned affair but the original gift was made with honest intent and that's why a solicitor was used to put the gift on record. Sometimes life doesn't map out according to plan.

AnotherJoe

ebygum83 wrote: »

To financegeek , I agree that I need to return the gift and that is my intention.
To AnotherJoe, -I know it looks like a planned affair but the original gift was made with honest intent and that's why a solicitor was used to put the gift on record. Sometimes life doesn't map out according to plan.

When I bought the house a relative helped me with a giftof approx. one quarter of the buying price. This was done through a solicitor so there is an official record of it. The idea was that after a few years I would return that gift.

Then its not a gift ! Its a loan. I bet you didn't tell the solicitor that or he'd also have been a party to fraud!

When you get a gift at Christmas do you return it to the giver later?

Odds are you'll get away with it.

John-K_3

ebygum83 wrote: »

To financegeek , I agree that I need to return the gift and that is my intention.
To AnotherJoe, -I know it looks like a planned affair but the original gift was made with honest intent and that's why a solicitor was used to put the gift on record. Sometimes life doesn't map out according to plan.

You said that the intention was to repay it. That makes it a loan, which makes you a fraudster.

As above, the probability of you being caught is low, but let us not pretend what happened here.

dimbo61

Repay the gift/ loan.
Make sure you repay both parts of your mortgage asap which will save you interest.
You have a property which can give you security if you clear the debt on the property

ebygum83

To AnotherJoe and John -k,
I have copied in the following from a webpage off 'SamConveyancing' (others are available) -
Your children may need to repay the gifted money

a) if the person gifting dies within 7 years and their estate is liable for inheritance tax; or
b) if the person gifting becomes bankrupt





Follow these steps to make your gifted deposit a nice gesture and not a nasty surprise:

1Confirm the Gift in Writing

Your solicitor will require a letter from you confirming that the money you are providing is a gifted deposit and that you have no rights over the property. A signed letter to your child should suffice and a copy of this should be supplied to their conveyancing solicitor.


The reason this is so important, especially if your child is also getting a mortgage, is that your solicitor needs to prove that you own no interest in the property and you are giving the money, never expecting it to come back. In fact, Mortgage lenders may still refuse to lend your child a mortgage even though the money given is a gift simply because of the risks around the potential for parents to say that the money was in fact a loan and not a gift. You should speak to your chosen mortgage lender to see if they are happy for you to receive a gift deposit.


---right, back with you (see option b above - the bit about someone going bankrupt ) .
The original mortgage was obtained with the lenders knowledge of the Gift. There has never been an intention to defraud anybody. The phrase you highlighted in your response (Another Joe) does look incriminating but that is more to do with my summarising of the situation because surely don't all fair minded people want to repay either a gift or a loan at some stage ? How is that dishonest? And the original lender was fully aware of it because the solicitors made sure of it (they legally have to). So unless I have been led down the garden path I don't think I've deliberately misled anybody.

ebygum83

Thanks dimbo (especially for not being judgemental!)

Oliver1191

I think there's a clear moral case to repay this money.

When you were in need the person helped you out. They could have chosen not to! They could have invested the money for their own gain, and they would have been in the right to do so as it's their money. They, however, appear to have done an act of kindness. That kindness / friendship is probably worth more than your house!

If you don't have all the money, maybe give back what you can (get it legally acknowledged). But, if you have your house at the end of it, what does it matter?

Try and make overpayments on your mortgage to compensate for the feeling of lost wealth (which to be fair wasn't yours to begin with).

John-K_3

ebygum83 wrote: »

To AnotherJoe and John -k,
I have copied in the following from a webpage off 'SamConveyancing' (others are available) -
Your children may need to repay the gifted money

a) if the person gifting dies within 7 years and their estate is liable for inheritance tax; or
b) if the person gifting becomes bankrupt.

Why have you posted the rules around inheritance tax? That is not why you are repaying, you are repaying as it was a loan, not a gift.

I'll not be offering you any advice, and at this point think it'd be for the best if you got caught, as it may remind you to be more honest in the future.