Mortgage Deposit from trust Fund

Homebuyer78

Hi all, 
Posted a bit more in depth in another section of the forum about the specifics of this question, but one for any mortgage brokers out there. My mother is potentially setting up a trust fund with a (roughly) 50k lump sum of cash that must be used to buy a house. The money is only repayable on my death, and she wants no monthly repayments or interest etc. I was under the impression that she would be 'gifting' us this money, and therefore applied for a mortgage accordingly. She has now however said that she won't, and the money will be placed in a trust fund with myself as the beneficiary. This is protect the money so that when I die, it can be distributed in a way that she wishes, which will likely be to a cause that she is closely involved in.

My question is around what impact this will have on us getting a mortgage? I'm not sure if a trust fund can 'gift' money to me, but assuming this will be viewed as a loan by a bank, is this going to invalidate our mortgage offer? I've done a lot of reading, but can't find an answer. It would appear there are problems where the trust itself buys a house, but this would be me using money given to me by the trust to then place a deposit down. I would simultaneously take out life insurance to cover the loaned amount incase I die early. 

Anyone have any experience of this? 

Thrugelmir

With strings attached it's not a gift. Are you buying with someone else? 

Homebuyer78

Thrugelmir said:

With strings attached it's not a gift. Are you buying with someone else? 

Yes. With my partner

kingstreet

If you have applied for a mortgage this would appear a perfect question for your chosen lender. It seems pointless getting generalisations here, then getting specifics there...

TN1984

It really depends on exactly what type of trust is created, but the trustees of a discretionary trust (for example) can distribute/gift money to any potential beneficiary, though if they do the beneficiary does not need to pay it back. However, it sounds as though she doesn't want to do that, so it seems more like she wants the trust to loan you the money when the time comes to buy a property, which I would assume most lenders are not going to like if that is your only source of deposit money. It could also be she wants to setup an Interest in Possession trust where the trust buys a share of the property with you, and gives you the right to live there (but no capital access) for your life. With that type of arrangement the share of the property would stay an asset of the trust, which again I am not sure a lender would like as you have no actual deposit as such.

Has your mother spoken to a solicitor about how the trust would be structured or has she just decided this is how she wants to do it? Best bet I reckon is get a more specific idea of what trust is actually being created, and then relay details to your lender.