I have a client who wishes to provide a large lump sum of money towards the purchase of a property. She cannot obtain a mortgage in her own right due to bad credit, therefore her partner is obtaining a mortgage for the balance of the purchase. My main concern is they wish to do a Declaration of Trust but the mortgage company will not allow this as she is not party to the transaction. A loan agreement has been mentioned, but I do not think this will suffice and could put my client in a very vulnerable position. If anybody has any suggestions that would be great and very helpful.
Mortgage lenders are very sensitive about where the balance of funds for a purchase comes from and are quick to characterise anything which is less than transparent as fraudulent, if it may impede the realisation of their security.
I wonder if there is anything that can be done about your clients supposed lack of eligibility for a mortgage? Presumably there has been some significant change in her financial position, in that she now has a large lump sum available. If she can demonstrate a change in her fortunes and that she has dealt responsibly with the previous indebtedness, could a mortgage broker not help her find a lender who would accept her as joint mortgagor?
I agree that a loan agreement, without security, is unsatisfactory- it may even put her in a worse position than she would be without any form of agreement.