Joint purchase, solo mortgage scenario

Biscuit212

Hello all,

Buying a property with my partner. We’ve found one on the market for £800,000- both aren’t first time buyers. Her parents are wealthy and don’t what her to get a mortgage, and have agreed to put £300,000 towards the purchase (she will then pay them back as it’s a loan). Therefore we want both names on the title deeds, but a mortgage only in my name for the remaining. 

The remaining £500,000 I can finance through a mortgage. I earn around £100,000 and with a deposit of my own I have a mortgage in principle of up to £500,000, although I’m sure it’ll be closer to £450,000. From speaking to the bank they actually consider the £300,000 as part of the mortgage deposit (which helps with the leverage). From the parent's perspective, I believe they see it as two transactions and aren’t aware that the bank actually receives their £300,000 (where the solicitor sends it).

Question:
- Is it possible to do ‘two transactions’, but does it make any difference? As the output of the transaction is the joint title deeds and one person on the mortgage it is the same. I am not keen if possible as it decreases my leverage and MIP probability, although I don't want to deceive the parents. 

Note- we are going to get a contract drawn up regarding what we both put in, not linked to the above topic.

Many thanks.

Thrugelmir

Why make life so complex? Your partners parents will need to declare the money as a gift.   Make a joint mortgage application. 

davidmcn

Is the bank aware the £300k is a loan, not a gift?
Do the parents expect any sort of security for their loan?
Not sure what you mean by "the bank actually receives their £300,000". They won't. The vendor gets their £300,000 along with the rest of the price.

Biscuit212

Thrugelmir said:

Why make life so complex? Your partners parents will need to declare the money as a gift.   Make a joint mortgage application. 

Thanks for your response. I don't think they want debt in their daughter's name, even if I'm paying 100% of repayments. I guess they assume it can be done above, which I'm not clear on.

Biscuit212

davidmcn said:

Is the bank aware the £300k is a loan, not a gift?
Do the parents expect any sort of security for their loan?
Not sure what you mean by "the bank actually receives their £300,000". They won't. The vendor gets their £300,000 along with the rest of the price.

Thanks for your response. Loan perhaps isn't the right term, it's a gift for inheritance planning, where she'll pay back an immaterial amount per month- I'd consider it a gift really.
Regarding the £300k, I have to apply for a mortgage for the full value £800k, as I don't believe it's possible to get a mortgage for £500k on an £800k home? Therefore their £300k would be sent to solicitors, my point is I'm not sure they're aware it's on the mortgage application. 

davidmcn

A gift needs to be a genuine, no-strings-attached gift, and the inlaws will need to sign a declaration saying so. And for inheritance planning it needs to be a gift anyway - if it's a loan then it will be treated as still forming part of their estate.

You're confused about the mortgage amount - you apply for a mortgage for the amount you're actually borrowing.

Thrugelmir

Biscuit212 said:

Thrugelmir said:

Why make life so complex? Your partners parents will need to declare the money as a gift.   Make a joint mortgage application. 

Thanks for your response. I don't think they want debt in their daughter's name, even if I'm paying 100% of repayments. I guess they assume it can be done above, which I'm not clear on.

There's adequate legal ways of protecting the £300k they gift, i.e. a declaration of trust.  

Biscuit212

davidmcn said:

You're confused about the mortgage amount - you apply for a mortgage for the amount you're actually borrowing.

I've spoken to HSBC, they seemed to be only be concerned with the property value, not the proportion of how much I want to value against the property. Is that a mistake?

davidmcn

Biscuit212 said:

davidmcn said:

You're confused about the mortgage amount - you apply for a mortgage for the amount you're actually borrowing.

I've spoken to HSBC, they seemed to be only be concerned with the property value, not the proportion of how much I want to value against the property. Is that a mistake?

They will be concerned about how much you borrow as a percentage of the property value, nobody is offering 100% mortgages at the moment even if you wanted one. If you only need to borrow £500k then that's 62.5%.