Bank of Dad helping son buy a house with non legal partner

BPL

Keep_pedalling said:

BPL said:

Keep_pedalling said:

Rosa_Damascena said:

I read a story in the Sunday Times about a widow who wasn't aware of the whopping loan her father-in-law had arranged with her husband to allow them to buy the house of their dreams. She found out soon enough after he had died and FiL wanted his money back. 

It actually sounded quite reasonable when I read the FiL's side of the story!

Not read the story as it is behind a pay wall, but this is the problem when these things are done in secret. I can’t really have a lot of sympathy for the FIL who along with his son must have declared that the £200k was a gift on the mortgage application. His son could have also covered the loan with life insurance, the poor widow had no part in the shenanigans and had the shock of this demand on top of the loss of her husband.

There couldn't have been a mortgage as they won't take a loan into account so it must've been a whopping sum. £££

There was a mortgage as the story headline says it was for a deposit. The loan agreement was apparently drawn up by the two men, but I am assuming that the mortgage company were told the same as the wife that it was a gift. 

Then is that technically a fraudulent mortgage application?

Keep_pedalling

BPL said:

Keep_pedalling said:

BPL said:

Keep_pedalling said:

Rosa_Damascena said:

I read a story in the Sunday Times about a widow who wasn't aware of the whopping loan her father-in-law had arranged with her husband to allow them to buy the house of their dreams. She found out soon enough after he had died and FiL wanted his money back. 

It actually sounded quite reasonable when I read the FiL's side of the story!

Not read the story as it is behind a pay wall, but this is the problem when these things are done in secret. I can’t really have a lot of sympathy for the FIL who along with his son must have declared that the £200k was a gift on the mortgage application. His son could have also covered the loan with life insurance, the poor widow had no part in the shenanigans and had the shock of this demand on top of the loss of her husband.

There couldn't have been a mortgage as they won't take a loan into account so it must've been a whopping sum. £££

There was a mortgage as the story headline says it was for a deposit. The loan agreement was apparently drawn up by the two men, but I am assuming that the mortgage company were told the same as the wife that it was a gift. 

Then is that technically a fraudulent mortgage application?

There have been a few threads where people have proposed to exactly the same, so I suspect quite a lot of it goes on. I would have thought however a deceleration that the transfer was a gift trumps a secret loan agreement, in a situation like this. I am sure a divorce court would also take the same approach when faced with conflicting documentation. 

Rosa_Damascena

SuseOrm said:

Keep_pedalling said:

You can’t protect a gift as it would no longer be your money. You can protect a loan, but your son would struggle to get a lender to agree to a mortgage if you just loaned him the money.

Why not just make the gift and let him manage his relationship, it is what we did with both our children. 

My ex mother-in-law did exactly that with my ex-husband’s new wife unfortunately what she’s done is divorced him.  kicked him out and has benefited from a lifetime of my ex mother-in-law’s work and fiddled our kids out of their inheritance

You can understand her bitterness.

Pre-pandemic I was having lunch with a group of friends considerably older than me (we'd worked well as a group 25 years ago and remain solid pals, even though their kids are my age), The discussion got round to IHT, they were happy to gift to their own children but where was a question of uncertainty over the choice of spouse it held them back. I suppose this is where grandchildren come in, but they too can get fleeced down the line. If that kind of thing will bother you when dead, you should spend and enjoy whilst alive!

saajan_12

BPL said:

Hi
Anyone had any experience of this? I want to help my son buy his first house with his long term girlfriend in an expensive area in England. What's the best way to do this and protect my gift or "loan" in the event of a split? They may well get married / partnership in the future. He and i don't like wasted money in rent and i feel as if i have benefited from low house prices when i bought but he can't. Relocation isn't an option at the moment but may be in the future to a very low cost area. 
TVMIA

The main question is (1) do you want to 'protect' the money from gf only or from son + gf and (2) how does this change once married (and how imminent is that)?

• To protect from son+gf, you'd have to loan them them the money. The mortgage lender will have issues with this, may or may not be okay if your loan goes on as a second charge behind the lender with repayments after the mortgage is paid off. 
• To protect from gf only, you could gift son the money and they buy the property as Tenants in Common, with a % split so each get their respective deposits back (or a % share of the sale proceeds representing their deposit). eg on a £100k house, if you gave son 30k and they jointly took out a 80k mortgage, then son owns 60% and gf owns 40% of which they each pay 50% of the mortgage balance. As long as they are unmarried, this should 'protect' the first 20k (scaled by any house appreciation / depreciation) for son. You'd have no rights to get it back. 
• If they get married, then they may be able to agree a pre-nup along the lines of the above, but it may go out the window particularly if there are children / long enough marriage / wife needs more than the above suggests to meet her needs. 

dimbo61

Depending on how much you want to help you could consider an Offset mortgage with YBS and Friends and Family.
I hope your Son and his G/F have some savings in LISA,s which get the 25% government bonus upto £4,000 each.
If you made the savings upto say 15/20% and they took out an Offset mortgage with YBS then the bank of Dad could open a linked offset account and use Dad,s savings to save interest on the mortgage.
Dad has full control of his savings and can withdraw the money at any time. Or spend if over the years.
Son and G/F benefit from paying less Interest and more capital each month

Exodi

Loza2016 said:

We bought our first property before we were married. My now FIL gifted my partner the deposit. 

We had an agreement drawn up by solicitor  that if we split up and the house was sold my now husband got the the deposit back and any remaining equity split 50/50. 

BPL said:

My solicitor says that's not possible sadly.  If you have any more detail how you did it?

I haven't read the rest of this thread, but this is incredibly common.

You'd have to gift your son the deposit (as in, you would no longer be legally entitled to it).
Your son would own the house as tenants in common with a deed of trust, and state that the deposit is returned before the equity is split (50/50 if they want).

E.g. you gift him £50k. There is £100k equity when they sell in the future - he gets £50k first, then the remaining £50k is split 50/50.

Please be aware that if they were to get married, this agreement would be less relevant.

Respectfully, you're asking the wrong questions if your solicitor has said this is not possible - Tenants in Common/Deed of Trust arrangements are incredibly common and would be part of most conveyancing solicitors day-to-day.

If you've asked if the money could be returned to you personally - then yeah, not possible, the mortgage lender would not agree to you having a second charge on the property.

BPL

dimbo61 said:

Depending on how much you want to help you could consider an Offset mortgage with YBS and Friends and Family.
I hope your Son and his G/F have some savings in LISA,s which get the 25% government bonus upto £4,000 each.
If you made the savings upto say 15/20% and they took out an Offset mortgage with YBS then the bank of Dad could open a linked offset account and use Dad,s savings to save interest on the mortgage.
Dad has full control of his savings and can withdraw the money at any time. Or spend if over the years.
Son and G/F benefit from paying less Interest and more capital each month

Just wondering what happens if i walk away or they split? They then have a massive mortgage to deal with. Would the approval include my savings offset or would they have to be able to prove they can service the loan without my savings offset?

getmore4less

BPL said:

dimbo61 said:

Depending on how much you want to help you could consider an Offset mortgage with YBS and Friends and Family.
I hope your Son and his G/F have some savings in LISA,s which get the 25% government bonus upto £4,000 each.
If you made the savings upto say 15/20% and they took out an Offset mortgage with YBS then the bank of Dad could open a linked offset account and use Dad,s savings to save interest on the mortgage.
Dad has full control of his savings and can withdraw the money at any time. Or spend if over the years.
Son and G/F benefit from paying less Interest and more capital each month

Just wondering what happens if i walk away or they split? They then have a massive mortgage to deal with. Would the approval include my savings offset or would they have to be able to prove they can service the loan without my savings offset?

Check the rules for YBS

For Barclays they have a product where they do take account of the "helpers" money and ring fence it for 5 years you can't get it back if the mortgage goes into arrears but is still yours.

Rate not so good but you do get interest on your lot of cash.

BPL

getmore4less said:

BPL said:

dimbo61 said:

Depending on how much you want to help you could consider an Offset mortgage with YBS and Friends and Family.
I hope your Son and his G/F have some savings in LISA,s which get the 25% government bonus upto £4,000 each.
If you made the savings upto say 15/20% and they took out an Offset mortgage with YBS then the bank of Dad could open a linked offset account and use Dad,s savings to save interest on the mortgage.
Dad has full control of his savings and can withdraw the money at any time. Or spend if over the years.
Son and G/F benefit from paying less Interest and more capital each month

Just wondering what happens if i walk away or they split? They then have a massive mortgage to deal with. Would the approval include my savings offset or would they have to be able to prove they can service the loan without my savings offset?

Check the rules for YBS

For Barclays they have a product where they do take account of the "helpers" money and ring fence it for 5 years you can't get it back if the mortgage goes into arrears but is still yours.

Rate not so good but you do get interest on your lot of cash.

YBS Yorkshire bs? 

dimbo61

Yes Yorkshire Building Society.
Your Son and his G/F need to be able to afford the mortgage !
Your help with the deposit and their savings make up the required deposit.
Each month they would pay X amount in Interest and Y amount in repayment.
Your Offset account would save them some of the Interest and build up an overpayment pot very quickly.
That is another matter ( Mortgage payment holidays )
Your Son + G/F would quickly build up equity which helps get the best deal come remortgage time.