Mortgage deposit in another name

sbsquarepants

Hi,

I have a slightly unusual problem.
Girlfriend and I have been saving for the past few years with an eye to buying a house. We currently live in an apartment, mortgage is in my name only, no negative equity or anything like that (not an awful lot of positive either!)

I ran the bank and told them my details, earnings, savings the usual stuff and they approved me in principle for the amount I was looking for. Again solely in my name, as the girlfriend is not working at present.

The problem arises when I told them about "my" savings - they are basically 1/3 in my account, 1/3 in the girlfriends and 1/3 is a gift from her father. The bank are telling me that as she is basically stumping up 2/3rds of the lump we have, they have to class it as a joint application and with the new rules I no longer qualify as she is counted as a dependant due to not being working. She's quite happy to just "give" me the money and sign whatever disclaimers are required but the bank still aren't willing to budge.

My question is - can anyone advise me on a workaround of some sort?

I have a large deposit, well in excess of their legal requirements, they know I earn enough to pay them back what I do need to borrow.
I can't really understand their point. How can it be that effectively being given a pile of cash can be seen as a bad thing? If I had that problem a bit more frequently I wouldn't need a damn mortgage at all!

Trish56

If you are purchasing a property in your own name then any lender will only accept savings in your name only. You need to transfer all the savings into your name only and perhaps take a different approach with a new lender. Are you selling the apartment and as you are a 2nd time buyer you will need 20% deposit.
Very hard to advise you without knowing more details.

seamus

If your girlfriend is providing 2/3rds of the deposit, then the bank know that in effect she may have a legal claim over the title and so will insist that she is placed jointly on the mortgage.

The bank know what you're doing, they're not stupid . Even if you do call it a "gift", the bank know you will be moving her in, she may lay claim to her chunk of the property and she is dependent on you.

First thing you need to do is move all of the money into a savings account, in your name. The bank will want to see six months' saving account statements, and when they see the transfers in, they will want to know where they came from. So after opening the account/transferring the money, you will need to wait about a year before approaching the bank again. Ensure there is a regular sum going into this savings account and the bank will then be satisfied that these are your savings which you have built up over a number of years.

Now the tricky part. If you get the mortgage, your girlfriend cannot put her name on the deeds. While unofficially and between yourselves you have an agreement that she owns "X" of the property, in real and legal terms she will not own any of it. If you break up and it gets messy, this will get really painful.

On top of that, if Revenue come a-knocking (which is not unlikely), they may ask where you got the money for the deposit. Again, since in legal terms the property will be entirely in your name, you may be liable for CAT @ 33% on the part of the deposit that she stumped up, since this will be considered a gift to you.

So what can you do? Well, you could get married. No, seriously. Then the transfer of the 2/3rds of the deposit from her to you is tax exempt. It also means the mortgage application itself would be a little less messy. It would really help in this scenario if your girlfriend had even a part-time job with a basic income; enough to cover her own expenses.

sbsquarepants

Thanks for the replies.

I'm looking to hold on to the apartment as I'm only about 20k past breaking even if I was to sell, I'd rather rent it and use it as a pension of sorts when the mortgage is paid.

As for the bank knowing what I'm doing, I told them up front. I'm not looking to pull the wool over any ones eyes, or spoof my way into a mortgage I can't afford or anything like that, I just didn't think it would be such an issue. Getting married wouldn't help as she'd still be classed as a dependant. Might save a few bob on tax but's that's about it. With hindsight we should have just put the money into my account from the get go but sure that's hindsight for you!

Mrs OBumble

Surely if you're co-habitating, then she should be counted as a dependent even if she wasn't seen as contributing the deposit???

Once you're N years together, then she gets some family-home rights even if you don't have joint ownership. Complicated legal area, suggest you get some proper advice here.

Trish56

OP how much of the deposit have you in your own name? If your girlfriend is contributing to the deposit and wont be on the deeds well then your Solicitor will draw up an agreement to protect her deposit.

Also you wont have to wait 1 year to apply, the banks look for 6 months statements when applying for a mortgage. Are you on a tracker mortgage at present? Has the bank taken into consideration that you are keeping the apartment as they will stress your repayment and wont take all rental income into consideration which could affect the amount you can borrow. Is it possible for you to get a gift from your parents rather than girlfriends.

sbsquarepants wrote: »

Thanks for the replies.

I'm looking to hold on to the apartment as I'm only about 20k past breaking even if I was to sell, I'd rather rent it and use it as a pension of sorts when the mortgage is paid.

As for the bank knowing what I'm doing, I told them up front. I'm not looking to pull the wool over any ones eyes, or spoof my way into a mortgage I can't afford or anything like that, I just didn't think it would be such an issue. Getting married wouldn't help as she'd still be classed as a dependant. Might save a few bob on tax but's that's about it. With hindsight we should have just put the money into my account from the get go but sure that's hindsight for you!

Calahonda52

sbsquarepants wrote: »

Thanks for the replies.

I'm looking to hold on to the apartment as I'm only about 20k past breaking even if I was to sell, I'd rather rent it and use it as a pension of sorts when the mortgage is paid.

As for the bank knowing what I'm doing, I told them up front. I'm not looking to pull the wool over any ones eyes, or spoof my way into a mortgage I can't afford or anything like that, I just didn't think it would be such an issue. Getting married wouldn't help as she'd still be classed as a dependant. Might save a few bob on tax but's that's about it. With hindsight we should have just put the money into my account from the get go but sure that's hindsight for you!

Some flaws here: u need a finical plan in place


have u crunched the numbers for holding the apt and taking on the new debt as well as the old and stress tested at ECB 4.25% plus maybe a margin of 2.5%

When rates go up, as they will over the duration of the new debt, assets values with go down so you need to do the math re debt servicing.
As for pension idea, funding it from net income via the existing apt is wrong as u will pay CGT on any gain and not benefit from the tax deduction against income:
u don't have to take the advice but go to all the lenders and get a full financial plan advice, for free, or pay an independent advisor for a one off fee: there a lot around and ask price up front.
Re
With hindsight we should have just put the money into my account from the get go


While all is fair in love and war, she would have been v foolish to do this: roles reversed, would u have: honestly ? Didn't think so:D

sbsquarepants

Mrs OBumble wrote: »

Surely if you're co-habitating, then she should be counted as a dependent even if she wasn't seen as contributing the deposit???

Once you're N years together, then she gets some family-home rights even if you don't have joint ownership. Complicated legal area, suggest you get some proper advice here.

I'm not trying to keep her from having any claim or anything like that - it's all down to earnings. As a single person, I only need to have I think it's 1100 left after paying the mortgage(s), as a couple with kids it's something like 2300 - I don't earn enough to cover it.

Trish56 wrote: »

OP how much of the deposit have you in your own name? If your girlfriend is contributing to the deposit and wont be on the deeds well then your Solicitor will draw up an agreement to protect her deposit.

Also you wont have to wait 1 year to apply, the banks look for 6 months statements when applying for a mortgage. Are you on a tracker mortgage at present? Has the bank taken into consideration that you are keeping the apartment as they will stress your repayment and wont take all rental income into consideration which could affect the amount you can borrow. Is it possible for you to get a gift from your parents rather than girlfriends.

I know about the higher stressing for rental properties and all that, I have been talking to the bank - the numbers are fine it's just the source of the deposit that's the problem. Existing mortgage is just variable rate, not a tracker and my parents don't have that kind of money.
I could make the 20% required but with what they'll lend me I'd also need her money to get anything half decent. We could move out of Dublin and get something but I'm not overly fond of commuting plus we'd both like to stay close to family so I'd really like to avoid that if possible.

Calahonda52 wrote: »

Some flaws here: u need a finical plan in place


have u crunched the numbers for holding the apt and taking on the new debt as well as the old and stress tested at ECB 4.25% plus maybe a margin of 2.5%

When rates go up, as they will over the duration of the new debt, assets values with go down so you need to do the math re debt servicing.
As for pension idea, funding it from net income via the existing apt is wrong as u will pay CGT on any gain and not benefit from the tax deduction against income:
u don't have to take the advice but go to all the lenders and get a full financial plan advice, for free, or pay an independent advisor for a one off fee: there a lot around and ask price up front.

When I say a pension, I didn't literally mean a pension. I just mean as a kitty for when I retire. The apartment would pay for itself, no doubt about it and even if I had to subsidise it somewhat (which I very much doubt) it would still make sense.

Calahonda52 wrote: »

With hindsight we should have just put the money into my account from the get go


While all is fair in love and war, she would have been v foolish to do this: roles reversed, would u have: honestly ? Didn't think so:D

I would have, but then again - I am a fool for love:D

sbsquarepants

Thanks for the replies folks.
I think I have a (fairly obvious) workaround. It's a little bit of a pain in the arse but sure you have to do what you have to do - I'm going to buy either something smaller or a fixer upper with the money they'll lend me on my own and then we can use her money to either fix it up or extend it.
Problem solved:)