to ask a MORTGAGE question (re loaned deposit!)

[stressedout1994]

Hi all,

I'm about to start a training contract and should qualify on c.£70k in November 2026. I have about £27k in savings. DP is also on a grad scheme at the moment (earning less than me) and should finish it in the next couple of years.

To cut a long story short, my Dad and his wife are looking to sell their home (they have two between them, both with a mortgage) and they have said they would be willing to give me an interest-free loan of £175k (from the equity in house 1) so that DP and I could buy a flat where we live in London. This would be with a view to us paying down c.£800 to them each month (in addition to the mortgage, which would be relatively low), and then remortgaging in three years time when I qualify as a solicitor. They definitely need the money back in three years as that is when my dad plans to retire and I think that money will represent the bulk of his pension.

This has come about because my Dad was saying that he intends to use the equity from house 1 (the £175k) to buy a flat in cash and rent it out in a cheaper area, but I suggested that he consider getting a BTL mortgage and renting it to DP and me, and we would then buy it from him when I qualify. However he doesn't think this is feasible as his age means he can only take out an 8 year mortgage term (I have looked into it and think that actually the age limits are different for BTLs, but I don't want to push the issue...)

WWYD if you were me? I am really grateful that he wants to help, but feel sceptical that a mortgage lender would lend to DP and I when we're both on fixed term contracts, and the deposit would essentially be on trust from my dad i.e. he would have a stake in the property. Do you know anyone who has done something like this?

Practically speaking I know I should just sit tight and wait to buy when I qualify - but I am nearly 30 and renting in London is so expensive and feels quite precarious. I also don't want to put pressure / stress on my Dad as he works too hard and I really think he should retire soon. I'm quite a neurotic person and anticipate that I would just be worried that the house would devalue / get destroyed in an earthquake and then I've nuked all of my dad's pension in this convoluted scheme because I couldn't wait two and a bit years.

What would you do if you were me? Please don't call me a desk job wanker with no clue about the real world etc. Thank you !

I think it would be complex because of capital gains tax.
I know it's a loan not a gift but it is all very complex.

Could you do an offset mortgage that allows friends and family to link their savings account to it?
So your dads money is held on a linked savings account in his name, that way the money is still your dads and he could withdraw it when he needs too. But it offsets your mortgage to reduce your interest payments.
I think Yorkshire Bank do one and there are others. Speaking to an independent mortgage advisor might give you some solutions.

You would have an uphill battle trying to find a lender who would accept a loan as their deposit, particularly if the suggestion is that your father would have some sort of interest in the property. If his loan was secured it’d need to be a second ranking charge behind the bank’s security, which would be an utter headache for all concerned (who would have enforcement rights? Would your lender be expected to consult with him if they wanted to take action?) Even if his loan was unsecured, you’d need to demonstrate to the lender that you could service his debt as well as theirs, which will be a challenge - and that’s not even taking into account your fixed term contracts.

On the fixed term contracts more generally, if you use a good broker, you may find there’s a path through if your employer is prepared to provide evidence that you’re highly likely to secure a qualification job with them and your expected permanent salary - my trainee ran into this issue a few months ago when she was buying and our HR team were able to provide this.

When I was a mortgage underwriter for one of the big lenders a deposit from a loan was a straight up no. No negotiation or solicitors letters would change that. If you wanted the money your dad would need to declare it as a gift. I have friends who have done this and then paid it back unofficially. Which is obviously risky for the person gifting the money so depends on how much trust is in the relationship.

Hello ladies :) thank you for all your advice and feedback. I've thought about it and don't want to jeopardise my relationship with my dad (and his retirement savings!) in the instance that anything should go wrong, so have explained my thinking and politely declined.

Thanks all for useful feedback, I actually think mumsnet is SUCH a useful resource! Thank you @blackberryhill that's really useful to know.