Cash from Family towards a deposit.

diystarter7

6022tivo said:

Thanks for that @youth_leader
I'll have a google. 


The reason for the initial question was around 20 years ago I was involved in a house purchase and the partners family chucked some money towards it, and the solicitor simply added a 2nd charge (After the mortgage company had been financially satisfied) of that said amount to the person who chucked the money in. 

They got it back when the house was ever sold if that makes sense. 
It was a very simple process that if I remember rightly didn't even go via the mortgage company as it wasn't a charge that would affect them in any way.youth_leader said:

I've given my son and daughter a money gift towards a house deposit, and have sent them a Declaration letter I found on line.  When they are ready to apply for a mortgage I'll be getting my solicitor to do a Deed of Trust for both.  

See, my previous post. This way it is certainly not a gift until declared as a gift
So the money remains the person that put the 60k charge on the house.

I'm pretty sure that many lenders may not lend and or see it as a slightly bigger risk when agreeing to a loan. However, see below as risk to lenders is not big, they may lend

Depending on where the property is,  should things go wrong in scenarios like this, as things stand and if the property is in a desirable location, I can see the lender recovering in full their 240k plus costs.

There is always a possibility unless made explicitly
 clear, EG property prices double in ten years and the person that gave 60k wants a share of the house back equating to 120k unless made clear in the contract.

Thanks all, interesting read.

youth_leader

Too true Gavin83,   I'm 65 and gifted my kids now as didn't want to wait too long because of the seven year rule,  although I understand it's taxed on a sliding scale if I die before.  Hope I've got many years before I need care, but you never know, I was really surprised to recently start suffering from a virus that affects your balance, labyrinthitis. 

kingstreet

There are lenders who will allow a deposit gift to be secured by a second charge. Here is Nationwide's criteria entry for example;-

"A gifted deposit is acceptable provided there are no conditions attached to it. The only exception is where the gift is provided by a family member and is subject to a second charge or family trust arrangement. The only condition allowed is for the repayment of the charge upon sale of the property. There can be no interest charged and the family member can have no other interest or claim upon the property."

housebuyer143

What happens when they want to remortgage? If the second charge is there will they be required to settle all the charges before they can do this, because the new lender will want to be first.

If so, you will be hindering them in getting the best rate. 

6022tivo

They have a advisor, we need to speak to him in more details about the gift/charge/deed situation. I'm sure he's been in this situation lots of times. 

Bank of Ireland appear to be the best for their situation today. 
5yr fixed at 4.75ish on 250k

I wonder if they feel the same way at Nationwide.. kingstreet said:

There are lenders who will allow a deposit gift to be secured by a second charge. Here is Nationwide's criteria entry for example;-

"A gifted deposit is acceptable provided there are no conditions attached to it. The only exception is where the gift is provided by a family member and is subject to a second charge or family trust arrangement. The only condition allowed is for the repayment of the charge upon sale of the property. There can be no interest charged and the family member can have no other interest or claim upon the property."

6022tivo

housebuyer143 said:

What happens when they want to remortgage? If the second charge is there will they be required to settle all the charges before they can do this, because the new lender will want to be first.

If so, you will be hindering them in getting the best rate. 

Interesting. So when the 5 years fixed are up, this could be an issue...

Maybe if a deed, this isn't as it doesn't have to be registered with the Land Reg? 

user1977

I'm not sure whether you're getting confused between two different things - if the gifter isn't ever going to want their money back, it doesn't make sense for them to register a charge. Are you just talking about one half of the couple who are buying wanting to make sure they get their portion of the money back?

kingstreet

If a second charge is registered, when remortgaging a simple deed of postponement prevents it being promoted to a first so a new mortgage lender can have its first charge with no issues. Obviously if a customer retention product is taken from existing lender this isn't a requirement as there will be no change of mortgage deed/security.

housebuyer143

kingstreet said:

If a second charge is registered, when remortgaging a simple deed of postponement prevents it being promoted to a first so a new mortgage lender can have its first charge with no issues. Obviously if a customer retention product is taken from existing lender this isn't a requirement as there will be no change of mortgage deed/security.

Good to know. I wasn't 100% sure how it worked with a change on there

lookstraightahead

A gift is a gift for the recipient to choose what to do with. If there's a divorce etc then the couple will sort it out amongst themselves.
it's a gift like any other. Otherwise it isn't a gift.

if I were the offer other of the recipient that wasn't actually receiving the gift I wouldn't be happy to go ahead with the mortgage with such a complication.