Buying a Property from a Family Member
Our client was a school teacher in her late 20s, earning just over £30,000 per year and living with her partner in a property owned by her father.
The property was valued at £ 270,000 and our client’s father (a long- standing client of ours) was looking to sell the property to his daughter for £135,000 on the basis that after two years her partner would be added to the mortgage and therefore be in a position to raise the finance to buy the remaining value of £135,000.
Our client had a car loan of £232 per month and 3 credit cards with total balances of just under £2,000 outstanding. These commitments were to remain in place.
Client wished to use £10,000 of her savings to reduce the mortgage required to £125,000.
The father wanted to protect the remaining £135,000 by placing a second charge on the property.
This means that if the daughter sold the property for, say, £ 270,000, the mortgage company would have a first charge (mortgage) of £125,000 which would be repaid followed by the father’s second charge of £ 135,000. Therefore the daughter would receive her £10,000 back.
Lenders will accept what they class as gifts from family members regarding providing a deposit when purchasing a property – but in most cases they will require written confirmation from the family member (the father in this case) that it is a pure gift i.e. the deposit is not repayable in the future. Therefore as the father required a second charge lenders would not accept this being a gift and would reject any second charge being placed on the property by the father.
After researching the market we found a lender offering a competitive two year fixed rate who was also willing to accept the father’s second charge.
We liaised fully with the lender and advised them at mortgage application that a second charge would be applied for by the father on completion of the mortgage and also recommended a solicitor for our client to use who was also fully informed that a second charge was required.
By researching and understanding the lender’s criteria and fully advising the chosen mortgage lender and solicitor about the second charge required, the purchase completed without any problems and the daughter now owns the property and her father has a second charge applied.
We have made a note to contact our client in two years’ time – a few months before the fixed rate expires – to review her and her partners’ circumstances with a view to the property being mortgaged into joint names. At that point the father will receive the outstanding £135,000 and will remove the second charge.
All mortgages have some sort of twist to them – we know because we deal with them every day – contact us on 0161 706 0242 to discuss your requirements, or complete and send the Contact Us Form and we’ll call you back.
Manchester Mortgages is a trading name of Mortgages 4U (North West ) Limited which is authorised and regulated by the Financial Conduct Authority (FCA register number 301076). Registered in England & Wales No. 4729252. Registered office: 7 Randale Drive, Bury, BL9 8HZ.
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