Accidentally committing mortgage fraud?

panga9292

Hi there,

My partner and I have had an offer accepted on a property with an approximate value £200 000.

Half of the money is coming from a mortgage, which we have successfully applied for, and the rest is coming from her flat sale.

She bought her current flat with a loan from her dad, which she is paying back every month (approximately £450 a month).

Unfortunately, when we went to our mortgage broker, she didn't realize that a family loan such as this needed to be declared.

We had to provide our broker with bank statements, each for the last 3 months, on which these payments are evident and we have since had the mortgage approved, no questions asked. 

What are the possible ramifications here? Should we come clean or am I overthinking this?

Thrugelmir

Was the £450 commitment declared on the mortgage application form? If not, why not. 

user1977

Presumably that loan is being fully repaid on the sale, which is simultaneous with (or preceding) your purchase - so why would it have to be declared to the new lender? Or is she still going to be making repayments to her dad afterwards?

theartfullodger

Ultimately if you ended up with the mortgage, bought, moved in, then they found out I would be very very surprised they would not have the right to repossess: Unlikely but possible.

See
https://www.inbrief.co.uk/property-law/mortgage-fraud/

And you wouldn;t want to end up on the "National Hunter" system which tracks such things (obviously all lenders & credit providers share these data), and end up either unable to get a loan in future or only a very expensive one.

https://nhunter.co.uk/about-us/

Just be open an honest about things, explain error made out of ignorance or however you'd describe it.

Good luck, hope it works out!

Owleyes00

Be honest about things for piece of mind. You aren’t borrowing a lot of money here so it might not even be an issue for affordability etc and may be that your partner’s dad simply needs to sign a declaration that he has no interest in the new property, or similar

panga9292

user1977 said:

Presumably that loan is being fully repaid on the sale, which is simultaneous with (or preceding) your purchase - so why would it have to be declared to the new lender? Or is she still going to be making repayments to her dad afterwards?

The money from the sale is going toward the new property so she is expecting to keep paying back her dad every month. 

Her dad, for what it's worth, has offered to write a letter technically 'gifting' her this money - to basically rescind any contractual obligation of repayment. I'm not sure this means anything this late in the day with the mortgage already approved. 

user1977

What do you mean by "technically" gifting? Is he actually gifting it or not? If she is no making the repayments then that (probably) solves the problem.

pinkshoes

panga9292 said:

The money from the sale is going toward the new property so she is expecting to keep paying back her dad every month. 

Her dad, for what it's worth, has offered to write a letter technically 'gifting' her this money - to basically rescind any contractual obligation of repayment. I'm not sure this means anything this late in the day with the mortgage already approved. 

How did you declare the money for the purchase and to the mortgage provider?

You said above that "half of the money is coming from a mortgage", so did you declare the rest as cash deposit or a loan?

The mortgage provider would give you a better rate if you have a 50% deposit (cash), but if the rest of the money is borrowed from her dad, then this is NOT a deposit but a loan, in which case the mortgage provider might not want to lend as it would make the actual deposit very low.

The dad can write a letter gifting the money but this would not tally with the loan payments. 

panga9292

user1977 said:

What do you mean by "technically" gifting? Is he actually gifting it or not? If she is no making the repayments then that (probably) solves the problem.

I presume it means that should she, for whatever reason, not be able to pay the money back - he's not going to come after her for it.

I believe they have a written agreement at the moment that stipulates she is to pay the money back each month.

user1977

panga9292 said:

user1977 said:

What do you mean by "technically" gifting? Is he actually gifting it or not? If she is no making the repayments then that (probably) solves the problem.

I presume it means that should she, for whatever reason, not be able to pay the money back - he's not going to come after her for it.

I believe they have a written agreement at the moment that stipulates she is to pay the money back each month.

That's not going to wash. I would come clean.

theartfullodger

Put like this, would you be happy to apply for a mortgage openly & honestly and then, having got it found the lender had been untruthful: e.g about the term in years, or mortgage rate??