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plclegal
plclegal, Barrister
Category: Family Law
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Experience:  Barrister at law
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Further question pertaining to my daughters divorce and

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Good morning Peter.Further question pertaining to my daughters divorce and financials please.The draft Consent Order and D81s are signed and about to be submitted for the courts approval.My daughter is now looking to release her ex husband from the mortgage and has an application meeting with her current lender next Monday.My wife and I plan to use £40k from equity release + I plan to take out a £10k loan to reduce her mortgage to £35k, which is all her low income can achieve.The mortgage company have asked for a letter from me stating the money we are providing is a gift and does not need to be repaid.
That is true for the £40k. We are treating the money as advanced inheritance and we will make a codicil to our wills stating that her portion of inheritance will be reduced by £40k plus the rolled up interest on it. So I don’t believe that can be described as ‘paying back’ the money for the purposes of her mortgage application - unless you tell me otherwise?The main issue I have is with the £10k loan. The repayments on that are £133 per month over seven years and I am asking my daughter to make those payments to me. So I think that is clear that she IS repaying the loan and whether that will adversely fetch her mortgage application?The arithmetic is quite good for her still, I believe. She is currently paying £514 pm for her mortgage of £85k. With her £35k mortgage her payments will be circa £215pm. Plus £133pm repayment of the loan she is still ‘in profit’ by £166pm, so it all adds up to be beneficial for hare disposable income.Will the mortgage company see it the same way I wonder?Or —- if I delay her starting to make repayments until after she has secured her mortgage and have a verbal agreement to that effect with her, can I state in the letter that the £10k is also a gift as it would be at the time of her mortgage application. After all, circumstances change. It can be that there is no intention to ask her to repay the loan at the time of her applying for the mortgage, so that would be truthful. However both parties, my daughter and myself could decide, post the mortgage being agreed and implemented, that she will now, at some point repay the loan.Is that a way of avoiding stating in my letter that the loan is repayable? Or is it mortgage fraud?Please advise? Many thanks, Frank

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It sounds like the mortgage company have assessed that the max she can borrow on her income is £35k. If she adds the loan repayment to her expenditure, it's likely to affect the amount that they will lend her.

I would say that your last suggestion is a sensible one, namely that:

"if I delay her starting to make repayments until after she has secured her mortgage and have a verbal agreement to that effect with her, can I state in the letter that the £10k is also a gift as it would be at the time of her mortgage application. After all, circumstances change. It can be that there is no intention to ask her to repay the loan at the time of her applying for the mortgage, so that would be truthful. However both parties, my daughter and myself could decide, post the mortgage being agreed and implemented, that she will now, at some point repay the loan."

A further alternative could be to release £50k equity but have a verbal agreement that your daughter repay £10k back to you at a certain date in the future, could it not?

plclegal and 2 other Family Law Specialists are ready to help you
Customer: replied 5 days ago.
Many thanks Peter. That has clarified my thinking. KRs Frank
Customer: replied 5 days ago.
Thank you Peter. That has clarified my thinking. KRs Frank

Thank you again for visiting JustAnswer, please do let me know if you have any additional questions in the future. I am also happy to answer any new questions on other topics that you may have, you can request me by putting “for PLCLEGAL” at the start of the new thread. Best wishes, Peter