26. Contributors to the remortgage price

When remortgaging a property, several sources can contribute to the overall financial strategy. These contributions can come from loans, gifts, or other forms of financial assistance. Understanding the different types of contributions and their implications is crucial for a smooth remortgaging process. 

Loan 

Loan contribution: A loan contribution involves borrowing money from a lender, such as a bank or mortgage provider. The borrower (homeowner) enters into a loan agreement with the lender, committing to repay the borrowed amount plus interest over an agreed period. The loan terms, including the interest rate and repayment schedule, depend on the borrower's creditworthiness, income, and the property's value. 

Loaner: The loaner is the entity or individual providing the loan funds, typically a financial institution specialising in home loans. The loaner assesses the borrower's ability to repay the loan and imposes terms accordingly. 

Impact on remortgage 

• Mortgage approval: Obtaining a loan requires a thorough approval process, including credit checks and property valuations. Delays or denials can impact the remortgage timeline. 
• Interest rates: The cost of borrowing (interest) affects the overall cost of the remortgage. Higher interest rates increase the total amount paid over the loan term. 
• Repayment obligations: Monthly mortgage payments must be factored into the homeowner's budget, affecting financial stability and future investments. 

Gift 

Gift contribution: A gift contribution involves receiving funds from a family member, friend, or other third party to help cover part of the remortgage amount. Unlike a loan, gifts do not require repayment, making them an attractive option for homeowners needing additional equity. 

Giftor: The giftor is the individual or entity providing the gift funds, commonly parents, grandparents, or friends. Giftors must often undergo identity (ID) and anti-money laundering (AML) checks as part of the remortgage process to ensure compliance with legal and regulatory requirements and prevent fraudulent activity. 

Impact on remortgage 

• No repayment: Gifts do not need to be repaid, reducing the financial burden on the homeowner. 
• Tax implications: In some jurisdictions, large gifts may be subject to gift tax. Both the giver and receiver should be aware of any tax obligations. 
• Proof of funds: Lenders often require documentation proving the gifted funds are genuinely a gift and not a loan disguised as a gift to ensure the homeowner's financial stability. 

Other Considerations 

• Mixed contributions: Homeowners often use a combination of loans and gifts. Coordinating these sources and ensuring all documentation is accurate is essential for a smooth remortgage process. 
• Legal and regulatory compliance: All financial contributions must comply with relevant legal and regulatory standards. This includes providing necessary documentation and undergoing checks to prevent fraud and money laundering. 
• Impact on Offers: The source of funds can affect the strength of a remortgage application. Lenders may favour borrowers with stable and secure financing.