Dad wants a share of property

namsoni

Hi all,

Thank you in advance. Hoping you can help me. My father is helping me out substantially (though not entirely) in getting together a deposit for a property. He had mentioned several times about wanting to give away his money to me and my brother before he passes away (note I've never asked him for money).

I found a property about 6 weeks ago, and had an offer accepted. My father confirmed he could help me, and wrote me an email saying that he was gifting me the money, as we had been advised we would need such documentation for the purchase. I proceeded with my mortgage application on this basis, saying no-one else had a share in the property and that my deposit was substantially coming as a gift. I was lucky, and had my mortgage approved within a week.

Cut to more than two weeks later, and my father has dropped a bombshell that he wants a formal share in the property. He had completely misunderstood what it meant for him to write the letter saying the deposit was a gift, and just thought it was something needed to accelerate the process. To be clear, I've got no issue with him having this, as his money is his money at the end of the day, but I've now got no idea how to go about this. I'm worried if I tell my bank now, that I will either have to start a whole new mortgage application which might at best add a couple of weeks onto the process, or worst, mean I lose my mortgage approval.

I've tried to do as much research as I can, and I think the best way forward is to complete the purchase, and transfer a share of the equity as a gift afterwards. He's looking for as 23% stake in a property worth £335,000, so worth around £77,050. That's actually less than the amount he is putting into the deposit, which would have given him a 37% stake, so to be fair, he would be gifting me about £50k eventually. He doesn't own any other property, and unless I've misunderstood, there wouldn't then be any cost associated with me gifting him equity, except solicitors and land registry charges. I would still need to inform the bank but figure it would just be easier to do this after purchase.

My feeling is that the bank probably wouldn't have a huge issue with this now, but as a first time buyer I'm really worried about this falling through. I've found a great property at a really good price, and I really don't want to lose it.

mrginge

namsoni wrote: »

I've tried to do as much research as I can, and I think the best way forward is to complete the purchase, and transfer a share of the equity as a gift afterwards....

How do you think the bank will view this plan?

00ec25

namsoni wrote: »

My feeling is that the bank probably wouldn't have a huge issue with this now, but as a first time buyer I'm really worried about this falling through. I've found a great property at a really good price, and I really don't want to lose it.

not huge issue, monumental issue would be more accurate

your father cannot own a share of the property unless he is party to the mortgage secured on the property. Your cannot give away 37% of the value of the security that the bank has in terms of its charge on the property and expect them to just say "no problem". The lender will not allow an owner who is not on a mortgage secured on the property.

- will your lender accept him? will he pass your lender's affordability criteria for the amount you are borrowing?
will you lose any FTB discounts you are getting?

- you say father does not own any other property? where does he live at the moment? rented? If so at least there won't be higher rate SDLT because he is a joint purchaser of a property that he will not be living in. However, if he does become a co-owner he will eventually have to pay capital gains tax on his profits from his share of the property - why does he think this is such a good investment for him given eh does not even own his own home?

when and how does he expect to cash in on his investment? he doesn't live there, if he is old enough to need care in a few years time his share will be taken into account in his means test if he needs a care home. Unlikey the council would force you to sell up at the time, but they will certainly be watching you for its eventual sale.

namsoni

Thank you. It appears this is a much bigger issue than expected. His interest seems to be less in wanting an asset, but some paranoia that if I were to meet someone (v unlikely at the moment!), and they were to move in with me, they could put a claim on the property. He thinks in his maintaining a share, that would at least protect some of the asset. I've looked into this, and it does seem unlikely that someone could claim an interest in the property, if they could it would be limited, and there are ways of protecting yourself. I'm also not convinced that in my dad having a 23% share of the property, this would actually limit the interest someone else could claim in the property.

Tom99

[FONT=Verdana, sans-serif]If a partner moves in with you and is paying you rent as well as a share of the bills, then you can both sign a cohabitation agreement which sets out that your partner will not be entitled to any equity in your property.

[/FONT] [FONT=Verdana, sans-serif]If you later buy a property together with a partner and are putting a greater amount into the purchase by way of deposit, you can both sign a deed of trust which will set out how the subsequent sale proceeds will be divided in an unequal way to ensure your greater deposit is reflected.[/FONT]

BrassicWoman

Your dad doesn't seem to trust your choice of partner.

This is no gift, and in would be saying no thank you. What if you sell up/ redecorate not to his taste? If there's negative equity is he taking a hit? Etc

Too complicated. Give freely, or don't give at all.

getmore4less

If he wants to protect his cash you could look at other option as him taking a share of the house is messy for reasons already outlined

The two that come to mind immediately are

Barclays Family Springboard

Offsets that allow 3rd parties to offset funds like
Yorkshire BS Offset Plus

Sea_Shell

I can't offer any advise i'm afraid, but it must be horrible to have the rug pulled out from under you like that, from what you thought was going to be a genuine gift. Good luck.

moneyistooshorttomention

Also sorry to find that he's pulled this bombshell (ie the gift that isn't a gift after all stunt).

Wondering whether he has done or intends to do the same stunt to your brother. If so - what happened there?

I know I'd be gutted in your position too to think I was going to have a gift like that - only to find that I wasn't after all and after I'd gone ahead on that basis.

I guess all you can do is explain to him that mortgage providers work on the basis that gifts really ARE gifts and wouldn't be prepared to go in for any complicated "manoeuvring" to, in effect, give back some of the gift the second it had been given to you by him and hope he accepts this and gives it to you as a gift after all (as he stated in the first place). Also explain that, if he went into a carehome at any point there could be problems if he was seen to have a share in your house (ie of the Council coming after the money - as it would look like his, rather than yours).

AnotherJoe

For your dad to protect his share, the best way would be a second charge on the house, only a few providers will accept this. Two you can try are Nationwide and Santander. You are going to have to start the entire mortgage process again, with all that entails in terms of delays
I have such an agreement with my daughter, the money is an open ended loan protected by a second charge.

As said by others, your plan is a complete non starter.

Also, when you say he doesn't own any other property, is that really correct ? He's got all this money but doesn't own the house he lives in?

moneyistooshorttomention

To me - I am thinking about Dad trying (belatedly) to turn part of the gift into him owning a share of the equity and his stated reason for his "change of plan" being = in case OP gets together with someone that subsequently tries to grab some of their house equity from them if they split up.

This just doesn't sound like something Dad could really believe was possible - ie that he'd protect his daughter (betcha OP is female:cool:) from a money-grabber type of man (rather than a "real relationship" type of man).

So, to me, it does smack somewhat of whether Dad is trying to control the sort of men his daughter has relationships with. Now I can see the logic of Dad hoping to prevent daughter getting together with a ne'er-do-well. But I do wonder whether Dad is also trying to ensure daughter doesn't get involved either with perfectly decent men who he just doesn't happen to approve of.

I understand Dads are concerned with who Daughter gets together with - as my own father at one time said he wished we were in a culture where he could choose a husband for me, ie an arranged marriage (ie in order to make sure I got a decent person as one) - but, as we're British (English), he had to accept I was going to choose what men to get involved with myself (whether he approved of them or no).

So I do wonder whether Dad is trying to exert undue influence over who Daughter gets together with - ie not just to keep out the "bad boys" from the scene.