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    • namsoni
    • By namsoni 11th Apr 18, 11:27 PM
    • 6Posts
    • 19Thanks
    namsoni
    Dad wants a share of property
    • #1
    • 11th Apr 18, 11:27 PM
    Dad wants a share of property 11th Apr 18 at 11:27 PM
    Hi all,

    Thank you in advance. Hoping you can help me. My father is helping me out substantially (though not entirely) in getting together a deposit for a property. He had mentioned several times about wanting to give away his money to me and my brother before he passes away (note I've never asked him for money).

    I found a property about 6 weeks ago, and had an offer accepted. My father confirmed he could help me, and wrote me an email saying that he was gifting me the money, as we had been advised we would need such documentation for the purchase. I proceeded with my mortgage application on this basis, saying no-one else had a share in the property and that my deposit was substantially coming as a gift. I was lucky, and had my mortgage approved within a week.

    Cut to more than two weeks later, and my father has dropped a bombshell that he wants a formal share in the property. He had completely misunderstood what it meant for him to write the letter saying the deposit was a gift, and just thought it was something needed to accelerate the process. To be clear, I've got no issue with him having this, as his money is his money at the end of the day, but I've now got no idea how to go about this. I'm worried if I tell my bank now, that I will either have to start a whole new mortgage application which might at best add a couple of weeks onto the process, or worst, mean I lose my mortgage approval.

    I've tried to do as much research as I can, and I think the best way forward is to complete the purchase, and transfer a share of the equity as a gift afterwards. He's looking for as 23% stake in a property worth £335,000, so worth around £77,050. That's actually less than the amount he is putting into the deposit, which would have given him a 37% stake, so to be fair, he would be gifting me about £50k eventually. He doesn't own any other property, and unless I've misunderstood, there wouldn't then be any cost associated with me gifting him equity, except solicitors and land registry charges. I would still need to inform the bank but figure it would just be easier to do this after purchase.

    My feeling is that the bank probably wouldn't have a huge issue with this now, but as a first time buyer I'm really worried about this falling through. I've found a great property at a really good price, and I really don't want to lose it.
Page 2
    • Tom99
    • By Tom99 12th Apr 18, 2:39 PM
    • 3,120 Posts
    • 2,174 Thanks
    Tom99
    FWIW (In case the OP wants to learn from what i have) my loan follows the house price.
    If the house price doubled, so would mine, if the house price halved, so would mine.

    Mine is open ended, doesn't need paying back until the house is sold.
    Originally posted by AnotherJoe
    That's interesting. How do you think you will be taxed when the house is sold, income tax or CGT?
    • namsoni
    • By namsoni 12th Apr 18, 3:19 PM
    • 6 Posts
    • 19 Thanks
    namsoni
    Thanks everyone for the replies. I've enjoyed the speculation on my gender, lol. To clarify, I'm a bloke.

    Also, the poster who said I didn't understand the basics on transferring equity, yes, that's correct. However, if I thought it was just a casual thing, as was suggested then obviously I wouldn't have come to this forum and posted this: "I'm worried if I tell my bank now, that I will either have to start a whole new mortgage application which might at best add a couple of weeks onto the process, or worst, mean I lose my mortgage approval." I did end my post on a more optimistic basis, mainly to make myself feel better, but if thought it was something that was simple, I wouldn't have sought out your advice - which was incredibly helpful I might add, along with everyone else's (except the amusing father-daughter speculation lol).

    As a little background, my dad has previous form in this. For two years, he kept going back and forth on helping me to buy a house. For example, out the blue a couple of years ago, he mentioned being able to help me with £150,000 to buy a place, and then I viewed somewhere on that basis. I came back to him about the property, and suddenly that amount changed to £20,000 as he decided to buy a place himself in his home town (which he never did). Shortly after I wrote him an email saying to not mention this to me again, as its utterly unfair to mess someone around like that.

    He didn't say anything for a year, and then when he came to visit me, he mentioned it again. I told him to not say it unless he genuinely means it. I stupidly believed it, and he's done almost the same again.

    I had decided yesterday to pull out completely, but when I said this, he clearly doesn't want me to blame him for the house sale falling through (which I probably would have, as he should never have wrote the email saying the money was a gift, without mentioned all the other concerns he had), so he's had a bit of a panic. He's now suggested an unsecured loan agreement. I've decided to give this one last try on that basis, with as many feasible protections for both me and him as is possible. If its still not good enough, then we're done.

    My gut feeling is that all of you are right, and I should just pull out but the prospects of me buying on my own without him are slim to none. I've got £40k in savings, and could feasibly save around £10k a year, but the issue is that I'm not going to be able to borrow enough.

    Ps I want to say, I really don't want to come across as ungrateful. I'm luckier than a lot of people, and am grateful to my dad for willing to gift me £50k. The issue is the shifting sands.
    • Candyapple
    • By Candyapple 12th Apr 18, 3:38 PM
    • 2,969 Posts
    • 2,352 Thanks
    Candyapple
    Can you not find a property cheaper than £335k so you can buy on your own savings? Are you buying a house?


    He's now suggested an unsecured loan agreement. I've decided to give this one last try on that basis, with as many feasible protections for both me and him as is possible. If its still not good enough, then we're done.
    Originally posted by namsoni
    I highly doubt any lender will accept a £50k loan to form part of a deposit. Or were you not planning on telling the bank and making an agreement between you and your dad? If the latter, you are committing mortgage fraud....
    I'm a Board Guide on the Credit Cards, Loans, Credit Files & Ratings boards. I'm a volunteer to help the boards run smoothly, and I can move and merge threads there. Any views are mine and not the official line of moneysavingexpert.com
    • hazyjo
    • By hazyjo 12th Apr 18, 3:44 PM
    • 11,144 Posts
    • 14,777 Thanks
    hazyjo
    As above really - if it's a loan, it's unlikely they'll let you borrow that and let you borrow on a mortgage. It's debt on more debt. They'd not let you borrow the deposit on a credit card or loan - bit like that, but (presumably) without the interest.


    Whereabouts are you looking? Changing areas may knock that £50k off. Perhaps a slightly longer commute?


    If your dad has form for this, I definitely wouldn't want to take his money unless it was truly gifted. Who's to say he won't want it paid back sooner or might need it and find it hard to understand you simply can't just get your hands on that cash?
    2018 wins: Single Malt Whisky; theatre tickets; festival tickets; year of gin(!); shoes; Thai cooking stuff; Jo Brand talk; Slime Factory; Flawless tickets; Comedy night tickets; Triominos
    • Jox
    • By Jox 12th Apr 18, 4:34 PM
    • 1,372 Posts
    • 2,863 Thanks
    Jox
    Sounds like you need to take what your dad says with a pinch of salt, probably best to buy yourself without this involvement.

    My parents "gifted" me for my deposit then a month later asked for it back and I had to get a loan to pay them back which took 7 years.

    12 yrs later, my husband's brother gifted us money towards the purchase of our house and my husband and I managed to pay him back within 5 months without him asking for it so we were proud of ourselves for that!

    There's always some string attached when money is given.
    • namsoni
    • By namsoni 12th Apr 18, 5:28 PM
    • 6 Posts
    • 19 Thanks
    namsoni
    Sounds like you need to take what your dad says with a pinch of salt, probably best to buy yourself without this involvement.

    My parents "gifted" me for my deposit then a month later asked for it back and I had to get a loan to pay them back which took 7 years.

    12 yrs later, my husband's brother gifted us money towards the purchase of our house and my husband and I managed to pay him back within 5 months without him asking for it so we were proud of ourselves for that!

    There's always some string attached when money is given.
    Originally posted by Jox
    Eeesh, what a nightmare.

    I think I've been trying to make something work, that simply won't. I've messaged my dad to say thanks but no thanks, and asked him to cover the £2000 I've spent so far.

    Thanks everyone for your advice.
    • xylophone
    • By xylophone 12th Apr 18, 6:26 PM
    • 27,688 Posts
    • 16,645 Thanks
    xylophone
    Is your father in a position to lend you the whole of the purchase price of a property?

    If so, a formal loan agreement could be drawn up by a solicitor whereby you would repay your father (interest/capital) over the term agreed and he would take a first charge on the property - ie, he would be your mortgagee.
    • teddysmum
    • By teddysmum 12th Apr 18, 6:44 PM
    • 9,145 Posts
    • 5,453 Thanks
    teddysmum
    Actually your father's requested 23% share of the house's value is not worth less than his contribution to the deposit, because you will have put in your share of the deposit and made the monthly payments.
    • G_M
    • By G_M 12th Apr 18, 10:10 PM
    • 46,192 Posts
    • 55,923 Thanks
    G_M
    This is a real shame.

    In these days, I really feeel for young people. Affording a property nowadays for a young person is so much harder than it was 'in my day'.

    I used to be a strong advocate of the young standing on their own 2 feet and earning what they need. But watching my nephews and nieces struggle I am now much more sympathetic to the idea of parental/family help to get started with housing. In the south especially, it's often the only way.

    You father clearly has resources. He also clearly wishes to help. But he also clearly has issues (of trust? of his own future financial security? whatever) and this is making it really hard for you to plan & move forward.

    • John-K
    • By John-K 12th Apr 18, 10:39 PM
    • 654 Posts
    • 1,024 Thanks
    John-K
    And its easy to say "buy what you can afford", where my daughter lives there is nothing thats buyable.
    Originally posted by AnotherJoe
    That doesn’t seem likely. I suspect that every house that comes for sale sells eventually.
    • AnotherJoe
    • By AnotherJoe 12th Apr 18, 11:06 PM
    • 11,864 Posts
    • 13,842 Thanks
    AnotherJoe
    That's interesting. How do you think you will be taxed when the house is sold, income tax or CGT?
    Originally posted by Tom99

    Good question, I have no idea. Maybe neither but as interest ?
    • namsoni
    • By namsoni 13th Apr 18, 1:28 AM
    • 6 Posts
    • 19 Thanks
    namsoni
    Is your father in a position to lend you the whole of the purchase price of a property?

    If so, a formal loan agreement could be drawn up by a solicitor whereby you would repay your father (interest/capital) over the term agreed and he would take a first charge on the property - ie, he would be your mortgagee.
    Originally posted by xylophone
    He is, but I feel like him being my sole mortgagee would be an even worse situation than the one I almost ended up in. I'm now looking into buying with a friend, because sadly, I would trust my mate (and many others), a lot more than I'd trust my dad (and no, it's not just because of this).

    This is a real shame.

    In these days, I really feeel for young people. Affording a property nowadays for a young person is so much harder than it was 'in my day'.

    I used to be a strong advocate of the young standing on their own 2 feet and earning what they need. But watching my nephews and nieces struggle I am now much more sympathetic to the idea of parental/family help to get started with housing. In the south especially, it's often the only way.

    You father clearly has resources. He also clearly wishes to help. But he also clearly has issues (of trust? of his own future financial security? whatever) and this is making it really hard for you to plan & move forward.

    Originally posted by G_M
    Thank you for being understanding. I did anticipate a backlash along the lines of being an entitled millenial, but actually most of you have been really empathetic. He does have big issues when it comes to money, and even said so himself this week, saying it is "psychological". He's always been like that, and the only thing I can really attribute it to, is that he was a refugee, and his family ended up with nothing after being quite wealthy. I think that's led to a paranoia about losing everything again. I can understand that, but if that extends to not trusting your family, then its a real shame. Que sera!
    • ukdw
    • By ukdw 13th Apr 18, 6:00 AM
    • 72 Posts
    • 43 Thanks
    ukdw
    Looking at AnotherJoe post and thinking out loud on this onet - To solve the hypothetical future divorces problem for a currently unmarried child then I wonder whether an agreement to give the money back to parents in the event of getting married in the future could work. Obviously the child wouldnt actually have the cash to pay them back before getting married so it would have to be made into an open ended loan at that stage. Appreciate that it could result a difficult conversations with a future fiance - but it would at least protect half the money from being lost in a hypothetical future divorce.

    Also you could potentially argue that this agreement wasnt really relevant to the current mortgage provider as your whole mortgage affordability/house ownership situation would be changing substantially anyway if you got married in the future.
    Last edited by ukdw; 13-04-2018 at 6:11 AM. Reason: Taking out punctuation that keeps getting converted in to codes.
    • getmore4less
    • By getmore4less 13th Apr 18, 8:07 AM
    • 33,642 Posts
    • 20,360 Thanks
    getmore4less
    The Barclays option ties your dads money up for 3 years then if you are keeping your end of the bargain by paying the mortgage, he can have it back with interest.

    regular lenders will not be happy with a loan.

    by using te springboard it also has a 3rd party making the rules for loan so if he want to change his mind he is not dealing with you.
    • getmore4less
    • By getmore4less 13th Apr 18, 8:16 AM
    • 33,642 Posts
    • 20,360 Thanks
    getmore4less
    Good question, I have no idea. Maybe neither but as interest ?
    Originally posted by AnotherJoe
    What do the terms of the loan say?

    if it is tied to the value of the house when you write of the loan you most probably create a PET at the current value of that share not the original value of the loan, that has IHT implications


    There's no concept of deprivation of benefits since i have other money and this is done very far in advance of any such need and no sign of it
    Its a loan so the deprivation questions have not happened yet it is still one of your assets.
    The time you need to consider any deprivation issues is at the time you write it off and convert it to a gift from a loan.
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