Charge on property and mortgage application

bell2020

Hi, 
I'm hoping this is the right group. Looking for advice... experiences... words of wisdom! Its a bit long sorry..

We are currently going through the mortgage process... our case is subjection to valuation (valuation is today). We are buying a house that a family member has built us and he is selling it to us for what it has cost him to build. Which is 165k. We have used the value of the property (265k) as the purchase price and then getting a mortgage for the 165... the difference is our equity deposit. The family member has already filled in and signed the gifted equity form for the lender and everything has been okay.. stressful, but okay! 

We have instructed solicitors and all searches have come back. Then today we had an email from our solicitor with a copy of the email they had received from the seller (family members) solicitor and it states that seller requires the equity deposit being gifted to be written that if we sell the property, it is to go back to the seller or to his estate if he is deceased. Solicitor wants confirmation we agree to this and that the lender also agrees to this. 

This is the first we have heard and I'm losing my mind that this could jeopardise the case!! Has anyone else experienced this or done this? The sellers solicitor said that it would be a charge on the property or something? Petrified the lender isn't going to agree to it and we are going to lose the house. 

Thanks in advance..

Meh123

bell2020 said:

Hi, 
I'm hoping this is the right group. Looking for advice... experiences... words of wisdom! Its a bit long sorry..

We are currently going through the mortgage process... our case is subjection to valuation (valuation is today). We are buying a house that a family member has built us and he is selling it to us for what it has cost him to build. Which is 165k. We have used the value of the property (265k) as the purchase price and then getting a mortgage for the 165... the difference is our equity deposit. The family member has already filled in and signed the gifted equity form for the lender and everything has been okay.. stressful, but okay! 

We have instructed solicitors and all searches have come back. Then today we had an email from our solicitor with a copy of the email they had received from the seller (family members) solicitor and it states that seller requires the equity deposit being gifted to be written that if we sell the property, it is to go back to the seller or to his estate if he is deceased. Solicitor wants confirmation we agree to this and that the lender also agrees to this. 

This is the first we have heard and I'm losing my mind that this could jeopardise the case!! Has anyone else experienced this or done this? The sellers solicitor said that it would be a charge on the property or something? Petrified the lender isn't going to agree to it and we are going to lose the house. 

Thanks in advance..

Oh wow, have you managed to speak to your family member about this as that’s a massive change of plans?! 

I suppose it would all come down to your lender and what they accept (and I don’t know anything about lenders and equity gifts) but that ‘charge’ is basically saying that they have a £100k interest in the property. 

bell2020

@Meh123 he isn't the easiest of people to deal with.. it hasn't been plain sailing with him at all and sometimes I've even wondered if he actually wants to sell it as there is always an obsticale to overcome. My husband asked him if we could put it in writing via solicitor after the sale so it doesn't jeopardise the case (not sure if we are even allowed to do that) and he said "just let the solicitor do their job" 

No idea where we stand. Really thought we were near the finishing line with the valuation today but now I don't even know if the lender will agree to this. Going to sit on this all weekend now too!! Argh!

Meh123

bell2020 said:

@Meh123 he isn't the easiest of people to deal with.. it hasn't been plain sailing with him at all and sometimes I've even wondered if he actually wants to sell it as there is always an obsticale to overcome. My husband asked him if we could put it in writing via solicitor after the sale so it doesn't jeopardise the case (not sure if we are even allowed to do that) and he said "just let the solicitor do their job" 

No idea where we stand. Really thought we were near the finishing line with the valuation today but now I don't even know if the lender will agree to this. Going to sit on this all weekend now too!! Argh!

Honestly I feel for you. I want to say that everything will be absolutely fine etc but this is one hell of a clanger for them to drop now. The point of ‘gifts’ is that they have no conditions, there is no repayment etc 
I feel your relative is going to be shooting themselves in the foot here as if the lender doesn’t agree to this (and I don’t think they would) then the sale falls through, no one wins. If he wanted more money for the house then he should have been clear about that at the start and you could have got the required mortgage for it....this is just a very backwards way for him to be doing things.

bell2020

Thank you... I know, I can't see a way out of it. He is basically wanting the whole 265k as if he was to sell it to someone else on the open market. Not his Son, wife and children for the amount it cost him like he originally said. So unfair but there really is no reasoning with him! Its going to be a long weekend 😭

[Deleted User]

Gifted deposit with a 2nd charge held to repay the deposit on sale of the property.   Not too hard but a complete no no for certain lenders.   

Who is your current lender?
What is the relationship with the vendor? 

Meh123

Deleted_User said:

Gifted deposit with a 2nd charge held to repay the deposit on sale of the property.   Not too hard but a complete no no for certain lenders.   

Who is your current lender?
What is the relationship with the vendor? 

It’s Vida on her signature 👍🏻 I really want you to come back with good news 😅

bell2020

Deleted_User said:

Gifted deposit with a 2nd charge held to repay the deposit on sale of the property.   Not too hard but a complete no no for certain lenders.   

Who is your current lender?
What is the relationship with the vendor? 

Oh okay, the sounds slightly positive... the lender is Vida Homeloans?

Vendor is my husbands father..

bell2020

Meh123 said:

Deleted_User said:

Gifted deposit with a 2nd charge held to repay the deposit on sale of the property.   Not too hard but a complete no no for certain lenders.   

Who is your current lender?
What is the relationship with the vendor? 

It’s Vida on her signature 👍🏻 I really want you to come back with good news 😅

😂 thank you - I do too!

[Deleted User]

Its not 100% clear on criteria but on Inter Family Transactions it states:  Where purchasing from a family member, they may not continue to reside in the property and must relinquish all rights to the property

The 'relinquish all rights to the property' would imply that they couldnt have a retained interest with a 2nd charge.   I dont do a lot with Vida though.  I might see if i can summon @ACG as its a lender much more in his area of expertise. 

I also found a note stating 'Vida Homeloans will not consider applications where there will be a simultaneous completion of a second charge' so i think it will cause problems.   Maybe another broker can give other ideas but it might be a case of looking at lenders again if father in law is being funny about this.  

I assume that going to Vida wasnt your first choice of lenders.  Do you have a broker leading you with this?   There may still be lenders to choose from.  More and more lenders are returning compared to when you first did your application 

Thrugelmir

Sounds as if you need to compromise. As you are effectively gaining £100k for nothing. How much has your relative actually earnt for doing the build ?