FTB - family offering to support with deposit. How best to go about it?

RWinter1993

Hi all,
I hoping to buy somewhere in the next 6 months or so as I am getting fed up of living in a HMO following a relationship breakup and am desperate for my own space. In the next 6 months I will have approx £15k to use as a deposit, plus extra for fees. My salary is just over £31k so I could potentially borrow £141k maximum if I was offered 4.5x. I am easily putting away £1k a month on top of £500 rent so affordability shouldn't be an issue. 

My dad has kindly offered to give me another £20k to support with a deposit, which would mean I could possibly buy a small house rather than a flat, which seems more sensible in terms of space to grow and resale value e.t.c. 

He has offered this to me as a gift, however I feel uncomfortable taking that much money from him. I have looked at the family springboard mortgage from Barclays, but that seems to suggest I could only borrow 4x salary and that would still leave me short for a house. I understand that him giving it to me as a 'gift' and me then paying it back later would be mortgage fraud.

What would happen if he gave me to the money and had a share in the house, I then remortgage in 5x years to buy him out? I don't really see how thats much different to buying out an ex-partner or remortgaging to pay off a help-to-buy loan? I understand there's a risk to him that prices then drop so I cant afford to buy him out, but I don't realistically see that happening anytime soon as I know that's been speculated for years but prices keep rising. Any tips or advice would be great!

Thrugelmir

RWinter1993 said:

 I understand that him giving it to me as a 'gift' and me then paying it back later would be mortgage fraud.

There's nothing to stop you having an unofficial arrangement. Lenders are only concerned with the legalities that surround money being lent rather than gifted. Which puts them at potential risk of loss. 

RWinter1993

Thrugelmir said:

RWinter1993 said:

 I understand that him giving it to me as a 'gift' and me then paying it back later would be mortgage fraud.

There's nothing to stop you having an unofficial arrangement. Lenders are only concerned with the legalities that surround money being lent rather than gifted. Which puts them at potential risk of loss. 

Would I be able to remortgage later on though or would that not be seen as suspicious, unless I said it was for a house refurb or something

K_S

@rwinter1993 With all due respect, you may be overthinking things a bit. What is the house price that you are aiming for?

If I may take the liberty of delving into your dad's mind, he may well prefer giving you a one-off gift rather than the complications that *may* come with being on the deed of another property.

Thrugelmir

RWinter1993 said:

Thrugelmir said:

RWinter1993 said:

 I understand that him giving it to me as a 'gift' and me then paying it back later would be mortgage fraud.

There's nothing to stop you having an unofficial arrangement. Lenders are only concerned with the legalities that surround money being lent rather than gifted. Which puts them at potential risk of loss. 

Would I be able to remortgage later on though or would that not be seen as suspicious, unless I said it was for a house refurb or something

I can only repeat my earlier point that the issue of gift vs loan is a legal one from the lenders perspective. As there's primarily two implications for a loan as a deposit. A financial interest in the property by the lending party and the right under insolvency law to recovery the money given. If your parents certify to the lender that it's a gift. Then this stands legally and protects the lender from any potential claims etc. 

lonibra

A gift and loan are two different things. None of the qualified mortgage advisors on the forum are going to tell you to lie to the lender about the source of your deposit, and you shouldn't. 

stevenbecca

you get it gifted to you and signed over as a gift, if you decide to pay it back once you've moved in that's your choice, obviously if it appears on a bank statement on a remortgage there would be questions asked.

dimbo61

If the bank of Mum and Dad can afford to gift £20,000 to a child then that is great.
This gives you a better LTV of 85/80% and maybe 75% so you could get 5 year fixed rate mortgages of 2.5% or close.
In 5 years time you will be at 60% LTV come remortgage time.
If your Dad can afford to do this out of savings and still afford his standard of living then it's his decision.
You will I hope have a good idea of what his home is worth and his savings, investments, pensions, Wills for Inheritance tax ?
If Dad gifts you £20,000 now and lives another 7 years then that money is taken out of his estate

Nebulous2

Giving it back wouldn't be mortgage fraud. Your Dad can give you £20k and he will need to sign to say it is a gift, not a loan. 

If later in life your situation improves and you go to your Dad and say "Thanks very much for helping me out when things were tight. I'm doing well and now want to give £20k back to you." That is no-one else's concern.  People who say the money is a gift when it isn't and then immediately set up a payment schedule to repay it are the ones committing fraud. 

Lenders are primarily concerned about affordability. If they are giving you as much as they think you can afford and then you are taking a £20k loan on top of that, that is a red flag to them. 

RWinter1993

Thank you to everyone that's replied so far. Yes I do agree K_S I am usually a bit of an otherthinker! 

Dad doesn't own any property, he lives with his long-term partner who already owned the house outright when they met. His assets wouldn't meet the threshold for inheritance tax at all, and he has enough to meet his outgoings. Also I hope he wouldn't pass away in the next 7 years as hes only in his late 50's and pretty healthy! 

That's why I was wondering if it would be worth him having a share in the house as stamp duty wouldn't apply. Reading your replies it seems the best plan then might be for him to give me the money as a gift (especially as he wasn't expecting it back anyway, I'm the one that's keen to repay him). I then save a set amount into a savings account each month and give this as a gift back later down the line. Unless anyone's got any other suggestions I haven't heard of.