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Original poster

Any mortgage brokers/legal bods

32 replies

ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:09

Apologies if this is in the wrong place, not sure where to post...

DH and I are looking to buy a house. £600k.

DF has kindly offered to "gift" us £200k.

We have £100k.

Mortgage agreement in principle of £300k.

DF has now got cold feet a little "what if you divorce, sell up etc" and wants to give us the money as a loan - but with no repayments (ish, I'll get to that) so he can have a secondary charge on the property of £200k.

Realistically, he's never going to ask for the money back. Sort of like an early inheritance. But due to issues in DH and I early relationship, DF wants to know should we divorce, he gets the money back, and can ensure it stays with me and DC, not losing half of it to DH.

He intends to word similar to "A loan of £200k which only becomes repayable on sale of the property, or on divorce of the buyers."

So there will actually be no repayments. And if the house gets sold for whatever reason, he gets repaid, secondary after the mortgage company is repaid.

When we applied for the mortgage, and got the agreement in principle, it was on the basis of a gift of £200k. This is now a loan...but with no repayments, but with a secondary charge on the property.

DH believes we will now lose our agreement in principle as it's no longer a gift. DF believes it will make no difference as it doesn't affect our affordability rating (because no repayments) and that the mortgage company gets satisfied in full,. first should the house get sold whether he's gifted us the money, or loaned in this manner.

Can anyone with insider knowledge shed some light? Not "best guesses" please or assumptions. Actual knowledge please. And I do know we can speak to our broker tomorrow, but DF made the comment "if your broker says this is a problem, it shouldn't be, and you need to find another broker" and I'd like to know if he's correct.

OP posts:
Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:18

@mnhq have I put this in the right place do you think, or should it go in legal?

OP posts:
NopeNotMe1 · 22/11/2023 21:24

Mortgage provider will want a letter from your DF saying that is a gift and he has no expectation of ever receiving the money or a share of the property in return.

Ihonestlydontgetit · 22/11/2023 21:24

Can you put 33% of the property in your name only. So the 200k is still a gift but it stays with you in the event of a divorce?
You'll need to speak to a conveyancing solicitor obviously.

Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:30

Ihonestlydontgetit · 22/11/2023 21:24

Can you put 33% of the property in your name only. So the 200k is still a gift but it stays with you in the event of a divorce?
You'll need to speak to a conveyancing solicitor obviously.

This means nothing in divorce though, does it. I've already looked this. Would you mind sharing your source as to how this can be watertight.

OP posts:
Blankscreen · 22/11/2023 21:30

It can still be a gift but you own the property as Tenants in Common. You have a deed of trust that you own the property in unequal shares, so that the £200k/% is ring fenced for you.

Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:31

NopeNotMe1 · 22/11/2023 21:24

Mortgage provider will want a letter from your DF saying that is a gift and he has no expectation of ever receiving the money or a share of the property in return.

Well, he doesn't want a share of the property.

But he does have an expectation of receiving the money on the sale of the house or dissolution of the marriage.

Will this not affect the AIP/mortgage?

OP posts:
Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:32

Blankscreen · 22/11/2023 21:30

It can still be a gift but you own the property as Tenants in Common. You have a deed of trust that you own the property in unequal shares, so that the £200k/% is ring fenced for you.

Yeah but a divorce court can ignore that if they choose to can't they.

OP posts:
NopeNotMe1 · 22/11/2023 21:38

ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:31

Well, he doesn't want a share of the property.

But he does have an expectation of receiving the money on the sale of the house or dissolution of the marriage.

Will this not affect the AIP/mortgage?

Show quote history

In that case this won’t meet the gifted deposit standards set by most (all?) providers. They want a gift to be an unconditional gift which this is not.

Worth pursing ideas from other posters about setting out as tenants in common or the potential of you signing a post nuptial agreement though.

Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:44

NopeNotMe1 · 22/11/2023 21:38

In that case this won’t meet the gifted deposit standards set by most (all?) providers. They want a gift to be an unconditional gift which this is not.

Worth pursing ideas from other posters about setting out as tenants in common or the potential of you signing a post nuptial agreement though.

Show quote history

I think you've missed the point. It's not a gift. He no longer wants it to be one.

What he's saying is if he calls it a loan (even though there will be no repayments) this is how he wants to do it so he can put a secondary charge on the property. How does this affect the current mortgage offer, if at all?

Tenants in common splits, and post nuptial agreements are both overuled in divorce courts at the judges whim.

DF needs a charge on the property, he's quite adamant.

OP posts:
NopeNotMe1 · 22/11/2023 21:50

In most cases they won’t accept money from family which is not an unconditional gift so it will vastly reduce your affordability ratings. Mortgage providers don’t want a third party with a stake in the property which is what this would be.

Ihonestlydontgetit · 22/11/2023 21:51

ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:30

This means nothing in divorce though, does it. I've already looked this. Would you mind sharing your source as to how this can be watertight.

Show quote history

My husband and I had a contract to this effect drawn up. I'm not sure it's water tight. Sorry, was just a suggestion.

Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:51

NopeNotMe1 · 22/11/2023 21:50

In most cases they won’t accept money from family which is not an unconditional gift so it will vastly reduce your affordability ratings. Mortgage providers don’t want a third party with a stake in the property which is what this would be.

Ah, is that how they would see it, even though he had no actual ownership of it?

OP posts:
Justbecause19 · 22/11/2023 21:54

Is your DH the type to try and take 50% of the house in divorce knowing how your DF feels? If not then tenants in common with a different % ownership will be fine. This will also enable you to control where the 200k goes in your will. There is no set split of property in divorce and can be decided by you both if the split is amicable. If you are worried about DH in divorce I wouldn't be buying a house with him

NopeNotMe1 · 22/11/2023 21:57

ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:51

Ah, is that how they would see it, even though he had no actual ownership of it?

Show quote history

If it’s legally agreed that you will give him £200K from the sale of a £600K house then for all intents and purposes he has a third of the property. Were you to default on the mortgage and be repossessed then the provider would have the added complication of him wanting his £200K back.

Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 21:59

Justbecause19 · 22/11/2023 21:54

Is your DH the type to try and take 50% of the house in divorce knowing how your DF feels? If not then tenants in common with a different % ownership will be fine. This will also enable you to control where the 200k goes in your will. There is no set split of property in divorce and can be decided by you both if the split is amicable. If you are worried about DH in divorce I wouldn't be buying a house with him

Without going in to a long back story, all you need to know is DF wants a charge on the property.

I know I can control my share in a will via tenants in common.

You absolutely can not protect via TIC %age in a divorce court though. The judge will notionally acknowledge it, then divide as he sees fit.

OP posts:
Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 22:02

NopeNotMe1 · 22/11/2023 21:57

If it’s legally agreed that you will give him £200K from the sale of a £600K house then for all intents and purposes he has a third of the property. Were you to default on the mortgage and be repossessed then the provider would have the added complication of him wanting his £200K back.

Show quote history

Even if his charge was secondary, so the mortgage company was at no risk of getting their money back first before he even gets looked at?

The mortgage company hold a charge over the house, at no point do they own any of it. Not does he.

This is kind of why I want someone with the exact legal knowledge to answer definitively.

OP posts:
messybutfun · 22/11/2023 22:17

As has already been mentioned, the mortgage provider will need a letter from your DF to state that it is a gift without strings. Without this letter , you will not get a mortgage.

If he was to put a charge on the property afterwards, this may be considered fraud and the bank could potentially ask you to repay all the monies immediately.

thelonemommabear · 22/11/2023 22:23

I'm pretty sure other than a post nuptial agreement then there is no real safe way of doing this without putting a charge on the property - I can understand why your father would want one to be honest given the value he is "gifting"

I'd discuss with your mortgage lender or broker. From someone who recently went through a very unexpected divorce I am glad I put in place certain protections to protect family assets from my now ex husband and my parents were very relieved as well....

Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 22:29

messybutfun · 22/11/2023 22:17

As has already been mentioned, the mortgage provider will need a letter from your DF to state that it is a gift without strings. Without this letter , you will not get a mortgage.

If he was to put a charge on the property afterwards, this may be considered fraud and the bank could potentially ask you to repay all the monies immediately.

It's not a gift!

Is anyone here actually a mortgage broker or property lawyer, as requested in OP?

OP posts:
thelonemommabear · 22/11/2023 22:37

DF made the comment "if your broker says this is a problem, it shouldn't be, and you need to find another broker" and I'd like to know if he's correct.

He is wrong and it is a problem. In answer to your opening post.

user1471462701 · 22/11/2023 22:38

There are some lenders who will accept the second charge arrangement you just need to speak to the right broker.

You could do a declaration of trust (again you need the right broker to point you in the direction of the best lender). That would be considered in the event of divorce but as with any post-nuptial arrangement it’s not always legally binding.

Natwest are quite amenable in these situations in my experience (property lawyer)

messybutfun · 22/11/2023 22:39

Yes, mortgage broker. If it is a loan, it will need to be declared as such on the application. If it is a gift, it will need a gifted deposit letter.

No bank will lend with a third party charge on the property.

Ring fencing a deposit via trust deed is possible but again, if your circumstances change that would be taken into account in a potential divorce.

Original poster
ThisHouseWillBeTheDeathOfMe · 22/11/2023 22:48

user1471462701 · 22/11/2023 22:38

There are some lenders who will accept the second charge arrangement you just need to speak to the right broker.

You could do a declaration of trust (again you need the right broker to point you in the direction of the best lender). That would be considered in the event of divorce but as with any post-nuptial arrangement it’s not always legally binding.

Natwest are quite amenable in these situations in my experience (property lawyer)

Thank you.

I will see what our chap comes back with, and if it's not good, I'll try NatWest. I'd have automatically written them off as they are mainstream and instinctively thought we'd need a more bespoke lender.

OP posts:
Pointblank2 · 22/11/2023 22:49

I’m following with interest. Hopefully there will be a way to do this, it must be a very common occurrence that parents want to help their kids on to the ladder but not lose in the case of a subsequent split.
I once worked in a bank and people often borrowed money from other sources once the mortgage was up and running, the bank’s mortgage was always first charge and subsequent lending from elsewhere was second charge. At no point did the first charge bank prevent the subsequent borrowing from elsewhere as they always knew they had first dibs on any sale proceeds in the event of a default. I can’t see that this scenario is any different from the first charge banks point of view other than borrowing at no cost from family won’t affect their ability to pay the mortgage whereas a loan from elsewhere would.

Blankscreen · 22/11/2023 22:53

I'm pretty sure there are consumer credit act restrictions on non institutional lenders having mortgages on residential properties.

I guess some sort of trust deed could be put in place where 1/3 is owned by df but this would need approval of the mortgage co.