Advice needed on mortgage for joint owned house with elderly relative

GreenGirl123

I really need some advice on this as we had an agreement in principle which has now been declined at the eleventh hour of our purchase and our mortgage broker has walked away.

I feel we could have been wrongly advised about the route to go down but would like some input.

My husband and I are both self employed (seperate limited companies), I am also a full time carer for my mum who has come to live with us in our rental house.

Before she moved in my husband and I were looking for a house to buy and had our a deposit ready, but now we need to move somewhere larger to accommodate us all. To get the bigger place that we need we would need to pool resources so we have looked at my mum contributing to the deposit, although not be on the mortgage.

Before going to a mortgage broker I looked at the Which website, also took advice from ageco. It seems in this situation it's usual for the person receiving care to be named as owning a percentage of the property and this is what we were expecting to do.

However, on speaking to the mortgage broker he said that this is not a situation that lenders would like. He advised us to name just my husband and I as owners of the property and to say that the share of the deposit from my mum was a gifted deposit. We accepted advice this as him knowing about mortgages better than we did.

We went through the process and had been entirely transparent about the situation from the start but when it came to the crunch the lenders said that they could not accept this, as when there is any sort of gifted deposit the gifter is not able to have any claim on the property, or live in it. On doing further research online this seems to be a standard policy so I'm wondering why he suggested to go down this route in the first place.

I've had other concerns about the broker as from the start he knew the situation and the lender he was going to approach, he recommended a solicitor to us to use, and several weeks in to the process he told me we had to change solicitor as the one he had recommended (the only one) was not on the approved list of solicitors who can work with that lender.

All advice appreciated but I would particularly be keen to hear from anyone who has been in this situation themself or any brokers who have obtained mortgages in these circumstances.

Thanks very much.

K_S

@GreenGirl123

- the maximum term of the mortgage is usually limited by the retirement age of the oldest borrower, hence probably why the broker indicated that this may be difficult to place with your mum down as a borrower

- a non-borrowing occupier (not contributing to deposit) is fine in most cases, all that is required is for them to sign a consent form and some pickier lenders will require that the NBO get independent legal advice

- a deposit from a non-borrowing occupier is an absolute no-no for some lenders (such as Skipton, Santander, Bluestone, etc) but other lenders are fine as long as long as it is a gift, your mum has no legal interest in the property and there is no risk of a tenancy agreement being in place or inadvertently created. I would not expect your case to be unplaceable just because of that.

Of course, what I've said above is based just on that one criteria - part of deposit coming from a non-borrowing occupier. Given that you're both ltd. co. directors and there might be other things in the background that limit your lender pool even before getting to this part.

I hope that makes sense.

MWT

GreenGirl123 said:

... the lenders said that they could not accept this, as when there is any sort of gifted deposit the gifter is not able to have any claim on the property, or live in it. On doing further research online this seems to be a standard policy so I'm wondering why he suggested to go down this route in the first place.

As K_S mentioned, with the right lender, it should be possible to deal with the 'gifted deposit and living in the property' part with a consent form which subrogates her residency claims below the rights of the lender, but that can be a difficult conversation to have with a vulnerable parent.

The desire to have her on the deeds is a more difficult conflict to resolve, and again goes to the same potentially awkward conversation with your mother and possibly other family members as if you let go of that requirement, no part of the property would form part of her estate in the future.

A broker like K_S can help you navigate the options and lenders, but I don't think you are going to find a lender happy with your mother contributing to the deposit, being on the deeds, in residence and not on the mortgage... but if you remove being on the deeds from the mix and add in the subrogation of residency rights it should be possible to find a lender I would have thought, so if that is something your mother could agree to then it would be worth directly contacting K_S or another broker so they can explore any pitfalls in the 'self-employed' aspects of your situation... 

Thrugelmir

Issues with gifting money and subequently occupying the property.  From the lenders perspective can be summarised into major four concerns:-

• Insolvency of the individual 
• Inheritance tax.
• Care home fee avoidance
• Right to remain in occupation (if mortgage holders default).

Lenders decided underwriting policy at macro not micro level. Hence the blanket no. 

K_S

Thrugelmir said:

Issues with gifting money and subequently occupying the property.  From the lenders perspective can be summarised into major four concerns:-

• Insolvency of the individual 
• Inheritance tax.
• Care home fee avoidance
• Right to remain in occupation (if mortgage holders default).

Lenders decided underwriting policy at macro not micro level. Hence the blanket no.

@Thrugelmir Just to be clear, are you claiming that no lender will lend in this scenario or that some lenders might have a 'blanket no' policy?

If the former, then that isn't correct I'm afraid.

getmore4less

We have had a thread here where the occupier and owner were not the borrowers which was by others.

IIRC HSBC was the lender. 

The house was still put up as security(mortgaged).