Can I Use Gifted Equity and Apply in Just My Husbands Name?
Published 11th December 2017
We are looking to buy my father in-laws house which is valued at £210,000 for a reduced price of £150,000 we wish to use the remainder as a gifting loan for our deposit. Do you know which lenders provide this type of service? I have had a bankruptcy so are looking to do this just in my husband’s name. We thought things were all set with another broker. However the lender he recommended can’t get their head around the way my husband is paid. As his pay is made up of a lot of overtime some of which is listed as ‘travel’ on his wage slips the lender won’t use it as they say it’s not overtime, even though it is! He’s been in the same job for years so we know he always earns it and we can afford the mortgage.
Looking at this case it sounds like we should be able to help. There are several factors to work through. These include the bankruptcy, the gifted equity, the sole application for a married couple and the verification of income. It sounds like your broker managed to work around some of them but not all, which is better than most to be honest!
Firstly, we help customers who have had a bankruptcy in the past all the time, it just depends on the date it was registered and discharged as to what amount of equity you’ll need. If registered inside the last 3 years you’ll likely need over 25% deposit. If over 3 years it’s possible to obtain up to 5% with some lenders, 15% with others. If you still wish to apply in just your husbands’ name then we can progress the application on that basis.
Secondly, looking at gifted equity (what the industry calls buying from your father in law for £150k when it’s valued at £210k, without your own deposit). Some lenders won’t accept these applications at all, however there are plenty that will, and this is quite a common scenario we handle regularly.
Lenders would normally need to know if your father in-law is going to reside in the property (some are happy with this), and/or if he’ll retain any interest in the property (no lenders happy with this). The property will also need to value up correctly and of course stamp duty will need to be paid by you on the £210k value.
Thirdly, the issue of making a sole application when you are a married couple. This is something many lenders just won’t accept, as they’ll usually want both of you on the application if you’re married. Thankfully some are OK with it so long as the income for the non-participant is not required to meet affordability. In your instance, you will need to be named as an occupier and sign to waive your rights to remain in the property should it be repossessed, and the lender will need to be happy that your husband can afford the mortgage on his own.
The final hurdle to cross is the income for your husband. We have an article on Mortgage Affordability here that covers how lenders view different types of income. As your husband has been in the role for some time there are lenders who will look at his total p60 earnings rather than picking through each payslip to try and work out his income, and others that will take an average of the last few months, some of which will take a large proportion of the additional income even if it isn’t guaranteed, and even if it is registered as “travel” rather than overtime, especially if it’s evidenced as regular and sustainable. Given that your loan to value is below 75%, the income shouldn’t be a problem.
If you make an enquiry online or give us a call, we can refer you to the specialist who can get an application agreed ASAP.
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