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  • FIRST POST
    • TJB24
    • By TJB24 16th May 18, 3:51 PM
    • 4Posts
    • 2Thanks
    TJB24
    Remortgaging to Repay Gifted Deposit - Disputed
    • #1
    • 16th May 18, 3:51 PM
    Remortgaging to Repay Gifted Deposit - Disputed 16th May 18 at 3:51 PM
    Hi All,

    I am a 23 year old young professional. Two years ago, my parents very generously offered me a loan of 67,000 to help with buying my first property. I had saved hard myself and so was approved to buy a single bed property with the deposit I had.

    My parents offered me the extra funds as a top up, with the purpose of buying a two bed property that I could then sub-let to a lodger. My father signed a waiver to the bank declaring it as a gifted deposit (i.e. they do not expect repayment). However we had a gentleman's agreement that I would repay them at 1% interest over 20 years, using the proceeds from the lodger. We do not have a written contract, except for emails. It was made clear that I could take payment holidays if needed, and was not expected to pay back the full loan before they passed away. I expressed that I wished to do so if possible.

    Two years later, my parents are now looking to buy a larger home themselves. However, neither of them work currently and their income is drawn from my father's inheritance. Unfortunately they were declined for a mortgage a few months ago, as the inheritance income does not come from a limited company.. Both of my parents are in their mid 50s so cannot yet collect a pension.

    To deal with this, they have now called in the loans to both myself and my brother. They have requested that I remortgage my home in order to pay back the majority of my outstanding loan to them. My older brother has already done so and repaid his entire loan to them. They have also borrowed heavily from a family friend. I have suggested that one of them works full time for a year, gets a mortgage and then quit the job - using the inheritance income from then on - unfortunately they have refused.

    I have recently been promoted, however on a temporary term only and there is no guarentee I will get a permanent contract - without which I cannot refinance.. If I did, according to online calculators I could borrow a maximum of an extra 48,000 to overpay my parents.I have however just remortgaged myself as my original 2 year term expired, and am now on a 5 year fixed.

    As this would be at a much higher interest rate, the opportunity cost between overpaying my parent's loan and the bank is an increase of about 20,000 over the remaining 30 year term to the bank. If interest rates rise during that time - as they almost certainly will - so will the interest.

    My understanding is that a bank is very unlikely to accept a remortgage if it is to make a gift to a family member. As my parents signed the gifted deposit waiver, the private loan likely won't be recognised. The alternative would be to seek a mortgage advance with my current provider. If accepted, it would take months for my promotion and advance to come through. With a mortgage advance I would effectively have two seperate mortgages which would not match up, meaning I would likely spend around one year on a standard variable rate before I could fully remortgage.

    I have tried to explain the difficulties to my parents, who have taken it as my refusal and instead demanded my life savings, which I had saved from my promotions to pay for a part-time university degree. If I take out a student loan this would considerably add to my exposure to very high interest repayments.

    I would be sincerely greatful for any advice. Sadly, my relationship with my parents has deteriated considerably, and we have not spoken for about six weeks.
    Last edited by TJB24; 16-05-2018 at 3:53 PM.
Page 1
    • foxy-stoat
    • By foxy-stoat 16th May 18, 4:28 PM
    • 1,682 Posts
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    foxy-stoat
    • #2
    • 16th May 18, 4:28 PM
    • #2
    • 16th May 18, 4:28 PM
    You have options - sell the property and morally pay back your parents - leaving you in hopefully a better position when you took the gift/loan out to get the property. You can start again in a property you can comfortably afford on your own.

    Any other option to repay apart from a lottery win will end in you not being able to support yourself.

    Obviously you can choose not to pay them back, which would obviously have a huge negative impact on your relationship with your parents and remaining family.

    I suppose you have to ask yourself, what would you do in their position - see it as a gift and leave it at that or take the moral route and expect to get paid by whatever means necessary. You have to think that without their help you would of bought a 1 bed place instead of a 2 bed.
    • Carrot007
    • By Carrot007 16th May 18, 4:37 PM
    • 1,134 Posts
    • 981 Thanks
    Carrot007
    • #3
    • 16th May 18, 4:37 PM
    • #3
    • 16th May 18, 4:37 PM
    Fraud always comes back to bite you.


    Seems it's your decision on wheather it bites you or your parents.


    To be honest I don;t know who is being the biggest idiot here! They know a fake gift is not easily repaid. You should not have accepted a fake gift.
    • foxy-stoat
    • By foxy-stoat 16th May 18, 4:42 PM
    • 1,682 Posts
    • 909 Thanks
    foxy-stoat
    • #4
    • 16th May 18, 4:42 PM
    • #4
    • 16th May 18, 4:42 PM
    To be honest I don;t know who is being the biggest idiot here! They know a fake gift is not easily repaid. You should not have accepted a fake gift.
    Originally posted by Carrot007
    I assume he was repaying it within the terms of the original gentle agreement - which would of been over many years. Repaying a massive lump wasnt really going to happen so I think the parents should be a little more reasonable.
    • glentoran99
    • By glentoran99 16th May 18, 4:50 PM
    • 5,253 Posts
    • 4,449 Thanks
    glentoran99
    • #5
    • 16th May 18, 4:50 PM
    • #5
    • 16th May 18, 4:50 PM
    Hi All,

    I am a 23 year old young professional. Two years ago, my parents very generously offered me a loan of 67,000 to help with buying my first property. I had saved hard myself and so was approved to buy a single bed property with the deposit I had.

    My parents offered me the extra funds as a top up, with the purpose of buying a two bed property that I could then sub-let to a lodger. My father signed a waiver to the bank declaring it as a gifted deposit (i.e. they do not expect repayment). However we had a gentleman's agreement that I would repay them at 1% interest over 20 years, using the proceeds from the lodger. We do not have a written contract, except for emails. It was made clear that I could take payment holidays if needed, and was not expected to pay back the full loan before they passed away. I expressed that I wished to do so if possible.

    Two years later, my parents are now looking to buy a larger home themselves. However, neither of them work currently and their income is drawn from my father's inheritance. Unfortunately they were declined for a mortgage a few months ago, as the inheritance income does not come from a limited company.. Both of my parents are in their mid 50s so cannot yet collect a pension.

    To deal with this, they have now called in the loans to both myself and my brother. They have requested that I remortgage my home in order to pay back the majority of my outstanding loan to them. My older brother has already done so and repaid his entire loan to them. They have also borrowed heavily from a family friend. I have suggested that one of them works full time for a year, gets a mortgage and then quit the job - using the inheritance income from then on - unfortunately they have refused.

    I have recently been promoted, however on a temporary term only and there is no guarentee I will get a permanent contract - without which I cannot refinance.. If I did, according to online calculators I could borrow a maximum of an extra 48,000 to overpay my parents.I have however just remortgaged myself as my original 2 year term expired, and am now on a 5 year fixed.

    As this would be at a much higher interest rate, the opportunity cost between overpaying my parent's loan and the bank is an increase of about 20,000 over the remaining 30 year term to the bank. If interest rates rise during that time - as they almost certainly will - so will the interest.

    My understanding is that a bank is very unlikely to accept a remortgage if it is to make a gift to a family member. As my parents signed the gifted deposit waiver, the private loan likely won't be recognised. The alternative would be to seek a mortgage advance with my current provider. If accepted, it would take months for my promotion and advance to come through. With a mortgage advance I would effectively have two seperate mortgages which would not match up, meaning I would likely spend around one year on a standard variable rate before I could fully remortgage.

    I have tried to explain the difficulties to my parents, who have taken it as my refusal and instead demanded my life savings, which I had saved from my promotions to pay for a part-time university degree. If I take out a student loan this would considerably add to my exposure to very high interest repayments.

    I would be sincerely greatful for any advice. Sadly, my relationship with my parents has deteriated considerably, and we have not spoken for about six weeks.
    Originally posted by TJB24


    You have committed Mortgage fraud, not the wisest thing t ogo telling that to the bank
    • TJB24
    • By TJB24 16th May 18, 4:52 PM
    • 4 Posts
    • 2 Thanks
    TJB24
    • #6
    • 16th May 18, 4:52 PM
    • #6
    • 16th May 18, 4:52 PM
    Thanks to comments so far, they are effectively throwing me and my brother under a bus for a house they don't need. It's private to them but this seems to be motivated by their marital difficulties and my mother's mental health.

    I'm not exactly inclined to bail them out for something that could end in a divorce settlement six months from now. If they seriously needed help, I would do everything I can to help.

    Also as it's a gentleman's agreement there is no formal contract, thus there is no fraud. Legally I don't believe I have an obligation to pay them back anything - but that's not the point.
    • ViolaLass
    • By ViolaLass 16th May 18, 4:56 PM
    • 5,357 Posts
    • 7,403 Thanks
    ViolaLass
    • #7
    • 16th May 18, 4:56 PM
    • #7
    • 16th May 18, 4:56 PM
    I wouldn't fuss to your parents about the increase in opportunity cost, but if you can't get a mortgage now, you can't get a mortgage. It's unreasonable of them to demand the money suddenly.
    • davidmcn
    • By davidmcn 16th May 18, 5:16 PM
    • 7,670 Posts
    • 7,816 Thanks
    davidmcn
    • #8
    • 16th May 18, 5:16 PM
    • #8
    • 16th May 18, 5:16 PM
    Also as it's a gentleman's agreement there is no formal contract, thus there is no fraud. Legally I don't believe I have an obligation to pay them back anything - but that's not the point.
    Originally posted by TJB24
    It doesn't need to be formal to be enforceable. And it was fraud to tell the lenders that it was a gift.
    • poppy10
    • By poppy10 16th May 18, 5:57 PM
    • 5,939 Posts
    • 7,184 Thanks
    poppy10
    • #9
    • 16th May 18, 5:57 PM
    • #9
    • 16th May 18, 5:57 PM
    My father signed a waiver to the bank declaring it as a gifted deposit (i.e. they do not expect repayment).
    Originally posted by TJB24
    That's the end of the story, to be honest.
    Your parents have no right to repayment at all. That's the risk they took when they conspired with you to commit mortgage fraud. They have no recourse now to demand repayment from you. If they took you to court they would lose. Morally it is up to you what you do. There's no way I would risk bankrupting myself just because my parents couldn't be bothered to get a job when they are still ten years off retirement age and yet want to buy a bigger house.

    Greedy baby boomers yet again. The most selfish generation
    Last edited by poppy10; 16-05-2018 at 5:59 PM.
    Signature changed by MSE ForumTeam
    • zx81
    • By zx81 16th May 18, 6:01 PM
    • 16,853 Posts
    • 17,865 Thanks
    zx81
    Also as it's a gentleman's agreement there is no formal contract, thus there is no fraud.
    Originally posted by TJB24
    That is precisely why it was fraud.
    • John-K
    • By John-K 16th May 18, 9:31 PM
    • 654 Posts
    • 1,011 Thanks
    John-K
    Hi All,

    I am a 23 year old young professional. Two years ago, my parents very generously offered me a loan of 67,000 to help with buying my first property. I had saved hard myself and so was approved to buy a single bed property with the deposit I had.

    My parents offered me the extra funds as a top up, with the purpose of buying a two bed property that I could then sub-let to a lodger. My father signed a waiver to the bank declaring it as a gifted deposit (i.e. they do not expect repayment). However we had a gentleman's agreement that I would repay them at 1% interest over 20.
    Originally posted by TJB24
    So you and the conspired to commit fraud.

    You lied to get the mortgage. Why do you think that that is acceptable?
    • John-K
    • By John-K 16th May 18, 9:33 PM
    • 654 Posts
    • 1,011 Thanks
    John-K
    Thanks to comments so far, they are effectively throwing me and my brother under a bus for a house they don't need. It's private to them but this seems to be motivated by their marital difficulties and my mother's mental health.
    .
    Originally posted by TJB24
    They have a criminal for a child, they have likely realised this so want their money back. I cannot blame them.
    • GoingOn30
    • By GoingOn30 16th May 18, 9:53 PM
    • 56 Posts
    • 42 Thanks
    GoingOn30
    It sounds like you may have overstretched yourself but what's done is done.
    I'd continue to pay your parents back over the rate you originally agreed, maybe a bit faster if you can.
    It sounds like remortgaging to pay them back the whole amount is not an option to you anyway so you have no choice.
    As others have mentioned, this was their risk to take, quite unfair to put you in this position.
    • ViolaLass
    • By ViolaLass 16th May 18, 10:12 PM
    • 5,357 Posts
    • 7,403 Thanks
    ViolaLass
    Yawn.

    We get it, it was mortgage fraud.

    What's that got to do with the OP's questions though?
    • sheepy21
    • By sheepy21 16th May 18, 11:55 PM
    • 51 Posts
    • 61 Thanks
    sheepy21
    The whole fraud thing aside, it's an entirely crappy thing to lend you money, encourage you to buy a bigger house then you were going to and on a whim demand it back. As you've said yourself, they're strangely trying to upsize and happy to throw yourself and brother into financial difficulty to do it, which as a parent myself I can't understand! They need to stop being selfish, children come first, they gave you the money when you were happy to make your own way, you can't be expected to financially ruin yourself for their flight of fancy.
    • getmore4less
    • By getmore4less 17th May 18, 7:14 AM
    • 32,035 Posts
    • 19,224 Thanks
    getmore4less
    you had an agreement but forgot to put the details in a form where they were on the same understanding.

    You believe you had a 20y 1% loan with unlimited payment holidays and no right to call it in before they died.
    (can you construct that from the emails)

    They have decided something different.

    shame your brother caved in because this probably would have been an easier discussion if you both took the same stance, now you are just the bad child.

    Seems from what you have said you have no wiggle room.

    You stick to the agreement you think you have.
    Pay them back as much as you can when you can
    Raise more funds(mortgage is probably a non starter without more lies)
    Sell up.

    What options do they have?

    Could they cash in the assets that are creating the income and you increase your payment rate to supplement the income.


    Your parents do realise they have to declare the 1% interest income they have been getting?
    • AnotherJoe
    • By AnotherJoe 17th May 18, 7:58 AM
    • 9,433 Posts
    • 10,435 Thanks
    AnotherJoe
    I would sell up, pay them back, buy a smaller place and be done with them.
    Or you may choose to ignore them and continue with your exist8ng payments.

    FWIW as you are paying them back every month, unless it's by cash, you have left a clear audit trail to prove that you and they comitted mortgage fraud, and no doubt it's also showing your parents committing tax fraud, pound to a penny they aren't declaring this income. .

    Note that if you take the latter option, not giving them back their money, if they end up splitting up, I'd be confident that your "disgraceful behaviour" in not paying back the loan will be cited as the reason the break up occurred to all your relatives.

    Re option 1, I suggest you tell them you are unable to remortgage and so have put the house on the market but this will take several months so they will have to wait. You could, if you wanted give them most of your savings (which can be replenished after you've sold) right now.. you could also reconsider your plan to get a degree, unless it's in a vocational are they are hugely overrated and you'd just be buying a 3 year vacation.

    This all,comes down to you. Their behaviour is bad but end of the day you admit to taking outa loan and you have no doubt gained from house price rises in the meantime..
    • enthusiasticsaver
    • By enthusiasticsaver 17th May 18, 10:02 AM
    • 6,407 Posts
    • 13,188 Thanks
    enthusiasticsaver
    I think they are being unreasonable changing the agreement terms albeit a private agreement. You are right that it will not be easy or cheap to remortgage, given you have only just remortgaged and depending on salary, financial position and LTV it might not be approved. I think though in your position I would give them some of your savings and delay the extra study. Is it critical to your career and would your employer contribute?

    Legally your parents don't have the power to force you to repay as your dad signed the waiver. He is the one who committed fraud not you although knowing the position I guess you were complicit.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • AnotherJoe
    • By AnotherJoe 17th May 18, 10:06 AM
    • 9,433 Posts
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    AnotherJoe
    Good point, the OP should deduct any expenses such as ERC and costs of selling and buying from the amount amd pass it over "in full and final settlement" and stay clear of their financial shenanigans in future.
    • cooltt
    • By cooltt 17th May 18, 2:26 PM
    • 583 Posts
    • 346 Thanks
    cooltt
    LOL, listen to all the puritans on here all living in little glass houses.

    The parents took the risk end of and now they want to destroy what they helped create, wow what lovely parents.
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