Mortgage and charge on property

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..

davidmcn

It's not gifted equity then, is it? It's a loan. Even if your lender is happy with this (and I suspect they won't be), are you? 

bell2020

davidmcn said:

It's not gifted equity then, is it? It's a loan. Even if your lender is happy with this (and I suspect they won't be), are you? 

I know 🙄 we have no intentions of moving... him and my husband have built it together and its our forever home... or atleast we have no plans to ever move. So that doesn't really bother us. It doesn't really make sense to me but we are just desperate to get into the house and so worried the lender isn't going to agree to this

loubel

It's extremely unlikely that your lender will agree to this. What a shame your family member waited so late in the transaction to inform you that they want to keep the equity rather than gift it to you!

AdrianC

Don't blame the lender for this.

They are as surprised as you are that the "gifted deposit" from your family member turns out to be a loan repayable on sale or death.

Talk to your family member about why they've changed their mind and put you in this position.

As far as the lender's concerned, what was a £260k property with £100k (38.5%) of equity and you borrowing 61.5% is now a £260k property with £0k of equity from you and you borrowing 100% between two lenders. In the event they need to repossess, there is a very strong chance you will be in negative equity between your two lenders.

bell2020

loubel said:

It's extremely unlikely that your lender will agree to this. What a shame your family member waited so late in the transaction to inform you that they want to keep the equity rather than gift it to you!

Thanks.. He has dangled us on strings like puppets all the way through, but we have just dealt with it because its our family home that we have been a part of building. Trying to find a way around it, like changing the purchase price so it isn't the value of the property or something... I don't know, clinging at straws!

bell2020

AdrianC said:

Don't blame the lender for this.

They are as surprised as you are that the "gifted deposit" from your family member turns out to be a loan repayable on sale or death.

Talk to your family member about why they've changed their mind and put you in this position.

As far as the lender's concerned, what was a £260k property with £100k (38.5%) of equity and you borrowing 61.5% is now a £260k property with £0k of equity from you and you borrowing 100% between two lenders. In the event they need to repossess, there is a very strong chance you will be in negative equity between your two lenders.

I haven't blamed the lender?? Hardly their fault is it..... we are just petrified that THIS is going to make them refuse us now!

Family member isn't easy to deal with so its easier said than done to just speak with him. He has decided to do this because of past experience - he bought his late ex wife a home, she then sold it and bought another house with her new partner and then she passed away. Meaning the family member in questions money is basically now with his ex wife's partner!! I'm assuming he is thinking the same with us, if me and my husband split... I'm legally allowed to stay in the house with our children and HIS money is "tied" in it... 

He has never said any of this before. He questioned on the solicitors documents why the purchase price sags 265 when he is receiving 165. Which doesn't make sense because that was the plan of us getting the mortgage in the first place. 

We are providing a 5% cash deposit also.. so there is a small element of our money too! But the whole point of this was him setting us up for life - his words! He is hardly doing that by now stating a 100k charge is to be put in place!

AdrianC

bell2020 said:

He has decided to do this because of past experience - he bought his late ex wife a home, she then sold it and bought another house with her new partner and then she passed away. Meaning the family member in questions money is basically now with his ex wife's partner!! I'm assuming he is thinking the same with us, if me and my husband split... I'm legally allowed to stay in the house with our children and HIS money is "tied" in it...

That's the thing about gifts. You give something away, you have no control over it. He's giving £100k away.
You want to retain control, and get the money back in certain circumstances? That's not a gift, it's a loan.

He has never said any of this before. He questioned on the solicitors documents why the purchase price sags 265 when he is receiving 165.

Because he's a close family member, and so the transaction is based on market value.

bell2020

AdrianC said:

bell2020 said:

He has decided to do this because of past experience - he bought his late ex wife a home, she then sold it and bought another house with her new partner and then she passed away. Meaning the family member in questions money is basically now with his ex wife's partner!! I'm assuming he is thinking the same with us, if me and my husband split... I'm legally allowed to stay in the house with our children and HIS money is "tied" in it...

That's the thing about gifts. You give something away, you have no control over it. He's giving £100k away.
You want to retain control, and get the money back in certain circumstances? That's not a gift, it's a loan.

He has never said any of this before. He questioned on the solicitors documents why the purchase price sags 265 when he is receiving 165.

Because he's a close family member, and so the transaction is based on market value.

I know 😭 yes thats what we explained to him but then the next thing we had contact from our solicitor with this email from his solicitor about this charge.

When we couldn't find a lender one of our options was to "buy" it for the 165k but the lender (Pepper money I think) wanted a 30% deposit which was around 50k!! Money we couldn't raise ourselves and they wouldn't accept any gifted equity. 

Not sure another way around it :-:neutral:

frogglet

How did you arrive at the market Value ?
If you were involved in building it, have you got any equity in the property?

bell2020

frogglet said:

How did you arrive at the market Value ?
If you were involved in building it, have you got any equity in the property?

He had it valued. 

My husband was (his son), he was his labourer, he didn't actually 'build' ...we all chipped in to help paint.. my father dug trenches for pipes! We paid some cash bills such as the carpenter for roof trusses, the plasterer, we bought all the internal doors, the bathroom tiles, the integrated mirrors... about 7k worth we have put in not including hours for work my husband and others have done.