second charge has become a loan on paper

[Thunderchild]

I have bought a house and used for the deposite a sum of money which I was given by my father and grandmother at different times over 7 years ago and 10K recently by my father which he had just been given by his mother.

As you never know what is to happen (say imarry and we split up etc) we decided to have a second charge placed on the property in my fathers name, so that if the worst should happen at least that deposit is safeguarded (and does represent over 30% of the purchase price).

Now the solicitors/mortage lender have called this a loan on the paper work which leaves us a bit uncomfortable as my dad is on pension credits and they love to know if you have a 1/2 penny. As far as i know this is just recorded with the land registry office and my father does not actually want the money back.

The money has been in my name for some years but for the recent 10K

How does mt dad stand, what does this mean ? He is that worried he is thinking of cancelling it but now that we are at the last formalities it is probably going to get very complicated needless to say I've spent £105 on this alone

[lslowry]

If your Dads on pension credit then he should have declared the £10,000 when claiming. If i was your father i would be worried about them (DWP) finding out.

[Thunderchild]

Actually he did tell them about the 10K and is getting a deduction for it although he no longer has it, what we are worried about is that the solicitor is putting it as he has lent me the whole sum which is not the case, we just wanted a "fail-safe" and if the event was ever to occur then and only then he may come into a sum of money as he does not necessarily have to accept it ( i think)

[buildersmate]

I don't see how you and your family can have it both ways:
If a second charge is put upon a property, it is basically a method of surety such that if 'the loan' isn't paid back, the 'lender' has a means of getting the money back when the property is sold.
One either gives money to the family or one gives money with strings attached. In this situation there are strings attached - HMRC will treat this as a 'gift with reservations'.
So, I believe that the financial organisations involved in your property are correct in treating this as if your family lent you £10k - which is actually what happened, albeit over a period of time - not a gift.
You don't say whether if he cancelled it your father also wants his £10k back at the same time. By cancelling it he would be writing off the security that he has against the loan, but that doesn't mean he has to have the money back - it just becomes either a unsecured loan, or a gift.
Irrespective of all of that, if he is claiming credits for being on low income, he would have had to declare this 'loan' and its circumstances - then let the authorities decide what impact it has on his claim. You are saying that he did that.

[dzug2]

Putting a second charge on the property converts the gift to a loan - by definition. He may never intend to call that loan in (in normal circumstances anyway - he may split up too), but it's still a loan.

As to alternatives, some form of trust might work - but you are going to need to take legal advice on that which will cost a good deal more than £100

[Thunderchild]

He does not want any of the money back but we wanted some security say I married and then split up (he has been through hell himself) We were advised that a second charge was "the way" to do it by the mortgage lender who we explained the circumstances too, then the next thing i know they are saying that he is lending me the money.

[Thunderchild]

And how does he do that ? and does that mean that if things go wrong later he we can't recover the money ? the papers clearly state that it is a loan and i was told "thats the way it's done"

[dzug2]

He doesn't have to enforce the second charge if he doesn't want to - but it's there if he ever needs it.

[Thunderchild]

so there should be no problem ?

[buildersmate]

There appears to be no problem provided he has declared in any application he has made for means-tested income (to the local authority - pension credits or whatever) that he actually has £10k invested in your house.

[Thunderchild]

well he declared the had the 10K then gave it to me, I believe the DWP will not just stop deducing money from him but yes they know about the money, they don't know he no longer has it yet

[cassa333]

I don't know the answer to this but just one question.

Would it have been better to put your father on the deeds as part owner of the house with 30% in his name and in his will leave it to you as a seperate bequeth (sorry about the spelling)?