Parents paying house deposit

[Pawnless Endgame]

You lucky lucky man!!!

I'm currently saving for my own house, slowly but surely!

Definitely lucky there to get £28k! I was very thankful when my parents gave me £3k to strip out and replace my old bathroom back in 2009 and another £1k in 2010 when my jobless state had my finances under strain.

Like with you, I had to save for my house deposit as well, although pocketing some of the student loans helped as I know that I'm not on a high enough wage to be obliged to pay it back.

 

[PapaLazaru]

The mortgage lender may want a letter from her stating that it is a non-refundable gifted deposit. They don't really care where the money cones from but they have to make certain enquiries to make sure you are not money laundering. The FSA do audits and the lender may have to prove they have made reasonable enquiries. The money does not have to go straight from ypyr mother to the solicitor either. She can gift it directly to you first.

 

[mnet674]

Why?

My parents gift went through my current account it wasn't an issue and the only thing needed was a signed declaration that it was a gift.

 

[freak2002]

Thanks for all the help peeps. My mind is at rest, time to start taking care of the rents I think!

I have already told the mortgage broker so will get a letter and her to sign the required forms. She got the money from my grandads inheritance so its all legit. She doesn't deal narcotics or anything

 

[harshuk]

i want your mum!

errr thats sounds wrong although ive never seen your mum you get what im saying

 

[Django x2]

mates parents (and in-laws) recently did this, although sadly it went to pay off most of his £25k debt. I'm left in wonder at what kind of house he could have bought if the debts didn't chew it all up. You won't pay tax unless someone snuffs it within 7 years. Even then, it's unlikely to come up

 

[The_Abyss]

Ignore all the nonsense about having to declare it to the mortgage company etc. It IS a PET and as others have said, the 7 year rule applies. Even if it did apply, there's no guarantee that the gift would attract inheritance tax anyway, as it could be dealt with from other parts of the estate.

If you want to be ultra sure that you're not going to get stung for tax in the next 7 years, look for a Gift Inter Vivos policy. That's basically life cover with the amount insured in line with the initial and then decreasing IHT exposure. Depending on the age and health of the person giving you the gift they're normally reasonable value. But shop around, as just a standard level term life cover may well do the trick a little cheaper.

Just for other info, depending on how much your Mum has given out (to you and others) the previous year, you won't need to worry about potential tax liability on £28,000. £3,000 can be gifted each year, and that unused allowance can be carried forward for a year too. So that's £6,000 of your £28,000 that could potentially not be part of the PET. You could also go into £250 annual small gifts allowance, but that's picking around the edges.

Personally, if you're likely to receive inheritance from your Mum in excess of £28,000 when she does pass away, I wouldn't bother with any of the above. If there was any tax due you could pay it out of the estate.

 

[Surveyor]

Ignore all the nonsense about having to declare it to the mortgage company etc.

Poor advice.

Not that the OP will likely have a choice anyway as the lender will enquire about the source of the deposit and require confirmation from the person gifting the deposit that they have no interest in the property and that it's a true gift.

They may also require proof of the source of the funds being gifted.

 

[The_Abyss]

It isn't poor advice. Yes, you might have to tick a box saying where the deposit came from (unlikely though, as this is really only intended for investment products) but the money has been gifted - it is yours. End of. It isn't a loan and therefore no interest in the property.

Financial services loves to over complicate things when there's no need, simply to cater for the one person in ten thousand that it might possibly be an issue for. OP, accept the gift, knowing the potential liabilities, and carry on buying your house. If you have to tick a box saying that part of your deposit was a gift, big deal. It won't change anything.

 

[Surveyor]

It isn't poor advice. Yes, you might have to tick a box saying where the deposit came from (unlikely though, as this is really only intended for investment products) but the money has been gifted - it is yours. End of. It isn't a loan and therefore no interest in the property.

Financial services loves to over complicate things when there's no need, simply to cater for the one person in ten thousand that it might possibly be an issue for. OP, accept the gift, knowing the potential liabilities, and carry on buying your house. If you have to tick a box saying that part of your deposit was a gift, big deal. It won't change anything.

The OP will have to declare the deposit came by way of a gift and the lender will go from there.

I recently gifted an amount of money to my brother towards the deposit on a house.

I had to sign a document stating it was a gift (not a loan) and that I would have no interest in the property.

I also had to provide my last 6 months payslips to show the source of the funds.

I believe that amounts over £10,000 have to be looked at for money laundering as well.

The OP cant just "Ignore all the nonsense about having to declare it to the mortgage company" as you put it.

 

[Burned_Alive]

I had a similar thing for a sum in the same region. Transferred the money into my account and then when the time came transferred as normal from my account to my solictor.

Absolutely no reason to inform the mortgage company unless you're funding direct from someone elses account. As far as they're concerned, it has come out of my savings.

 

[The_Abyss]

The OP will have to declare the deposit came by way of a gift and the lender will go from there.

I recently gifted an amount of money to my brother towards the deposit on a house.

I had to sign a document stating it was a gift (not a loan) and that I would have no interest in the property.

I also had to provide my last 6 months payslips to show the source of the funds.

I believe that amounts over £10,000 have to be looked at for money laundering as well.

The OP cant just "Ignore all the nonsense about having to declare it to the mortgage company" as you put it.

I'm sorry but the OP will NOT have to disclose this nor sign a document confirming it is a gift and not a loan. Take a step back and think about it. For any mortgage deposit you make would you have to go back years and declare any gifts at all, no matter the size, to your mortgage company?

Let's put it another way - you've already got a mortgage, you get a gift from a parent and decide to use your £28,000 to replay part of your mortgage. Do you have to sign a disclosure document then? No. Sounds more like you've got a solicitor that last did any CPD in the 70s or 80s.

Last 6 months of payslips? Proof of continuing income to meet the repayments and proof of employment.

Amounts over £10,000? Yes, but this is now outdated and has only ever been for investment products, not loans.

Misinformation, especially that based on one example (see my earlier post) will only unsettle the OP. There's no need for it.

 

[Surveyor]

I'm sorry but the OP will NOT have to disclose this nor sign a document confirming it is a gift and not a loan. Take a step back and think about it. For any mortgage deposit you make would you have to go back years and declare any gifts at all, no matter the size, to your mortgage company?

The lender is interested in the borrower's true equity in the property for the purposes of giving them a mortgage.

If the property was repossessed then if the money was a loan, or the person who gifted it had an interest in the property, the lender could be well out of pocket.

Let's put it another way - you've already got a mortgage, you get a gift from a parent and decide to use your £28,000 to replay part of your mortgage. Do you have to sign a disclosure document then? No. Sounds more like you've got a solicitor that last did any CPD in the 70s or 80s.

That's after the mortgage is granted.

The lender is interested in the circumstances at the time they make the loan.

Last 6 months of payslips? Proof of continuing income to meet the repayments and proof of employment.

Nothing to do with it.

I'm not paying the mortgage, it was proof of where I obtained the money that was gifted.

Amounts over £10,000? Yes, but this is now outdated and has only ever been for investment products, not loans.

It's got nothing to do with the loan.

The deposit is the money that's potentially being laundered.

Misinformation, especially that based on one example (see my earlier post) will only unsettle the OP. There's no need for it.

So sorry to quote my own recent personal experience, it's of no relevance whatsoever

And how is it an attempt to unsettle the OP?

It's not like I, and others, have said anything terrible is going to happen.

All that's required is some documentation to clarify the circumstances and source of the gift.

It's not a big deal but it's not something that can just be ignored.

 

[Chris1983]

This is the strangest post I've ever read! Unbelievable.

 

[Hyper]

Surveyor speaks the truth,

My dad had to type out and sign a similar document saying its purely a gift and he has no financial gain in the property.

He then transferred the money to me, I informed the solicitor where the money was coming from and they asked to see statements showing it leaving my dads bank account and going into mine. That was it really,

But I would definitely inform your lender and solicitor early on to avoid complications.

 

[The_Abyss]

The lender is interested in the borrower's true equity in the property for the purposes of giving them a mortgage.

If the property was repossessed then if the money was a loan, or the person who gifted it had an interest in the property, the lender could be well out of pocket.

They don't have an interest in the property. The gift of the money is irrelevant. Don't confuse anti-money laundering checks with a legal interest in the property. There's none.

That's after the mortgage is granted.

The lender is interested in the circumstances at the time they make the loan.

No, it is one and the same. The circumstances at the time they make the loan are that the borrower has sufficient deposit. These are savings. End of.

Nothing to do with it.

I'm not paying the mortgage, it was proof of where I obtained the money that was gifted.

6 months payslips will not reconcile where a deposit of £28,000 came from. It is irrelevant. Demonstrating continuing income for a loan application is all about servicing the subsequent debt.

It's got nothing to do with the loan.

The deposit is the money that's potentially being laundered.

Once again, do not confuse AML with issues over inheritance tax and an interest in the property. The gift is not important, nor the timing - these are personal to the borrower. If I gave you £28,000 and 4 years later would you be expected to declare it if you bought a house? No. These are savings. If you need to tick a box that says 'My Mum gave me the money' then big deal. It won't affect your application.

If you tick the box that says ' I sold crack for the past 6 months and saved this cash' you'd still have the same deposit but would be unlikely to go much further for obvious reasons...

So sorry to quote my own recent personal experience, it's of no relevance whatsoever

And how is it an attempt to unsettle the OP?

It's not like I, and others, have said anything terrible is going to happen.

All that's required is some documentation to clarify the circumstances and source of the gift.

It's not a big deal but it's not something that can just be ignored.

You're correct, it is not a big deal at all and is something that happens every day of the week across the country.

The OP was rightly asking questions about inheritance tax. This is just distraction from that point and, as already mentioned, a demonstration that financial services love pointing out risk, no matter how insignificant or unlikely. It is outdated and has little point other than serve as small print. That's not cheapening your own experience, but rather positioning it relative to considerably more.

A solicitor will highlight these risks to you, and try to mitigate them at your cost and their gain. That's their role. But think how different the process will be if, when asked about your deposit (if you are even asked) you say: 'they're my savings' compared to 'my Mum will give me the money and now I'm worried about inheritance tax'.

The OP has asked for some information, and now he has a lot. Hopefully he'll see the best way through, as not all is useful and relevant.

 

[The_Abyss]

Surveyor speaks the truth,

My dad had to type out and sign a similar document saying its purely a gift and he has no financial gain in the property.

He then transferred the money to me, I informed the solicitor where the money was coming from and they asked to see statements showing it leaving my dads bank account and going into mine. That was it really,

But I would definitely inform your lender and solicitor early on to avoid complications.

Why was that - because you said that someone else is paying the deposit?

It sounds like you've gone through a full disclosure process that is really not at all necessary, unless you're bringing your Dad into the deal and he's transferring the money as part of it.

If the OP's Mum is going to gift the deposit, just transfer it in advance and complete a normal house purchase.

Alternatively, chuck another £500 at your solicitor, get loads of pointless paperwork signed, and go through a ton of needless stress to do the same thing.

And after either, your inheritance tax issues still will not be improved either way. OP - accept the cash from your Mum, buy your house and enjoy it. The first Sunday dinner you cook for her in it, she'll be over the moon.

 

[Surveyor]

They don't have an interest in the property. The gift of the money is irrelevant. Don't confuse anti-money laundering checks with a legal interest in the property. There's none.

The purpose of getting something in writing is to confirm that the person who gifted the money has no interest in it or the property.

The lender doesn't want to find out some time down the line that the gift was actually a loan or that it gave the person ownership of part of the property.

No, it is one and the same. The circumstances at the time they make the loan are that the borrower has sufficient deposit. These are savings. End of.

It's not the same.

At the time of making the loan the lender will want to know that the borrower has true equity in the property and that the deposit isn't just another loan or that it was obtained in exchange for part ownership in the property.

6 months payslips will not reconcile where a deposit of £28,000 came from. It is irrelevant. Demonstrating continuing income for a loan application is all about servicing the subsequent debt.

6 months payslips were what I had to provide as the source of my gift was from my pay.

In the OPs circumstances different documentation will be needed as the source of the funds is different.

Once again, do not confuse AML with issues over inheritance tax and an interest in the property. The gift is not important, nor the timing - these are personal to the borrower. If I gave you £28,000 and 4 years later would you be expected to declare it if you bought a house? No. These are savings. If you need to tick a box that says 'My Mum gave me the money' then big deal. It won't affect your application.

If you tick the box that says ' I sold crack for the past 6 months and saved this cash' you'd still have the same deposit but would be unlikely to go much further for obvious

I'm not confusing anything.

The source of the deposit is important.

You could buy a house with a deposit of dirty money, get a mortgage, sell the property afterwards and then be left with a fair chunk of your dirty money as now clean.

You're correct, it is not a big deal at all and is something that happens every day of the week across the country.

The OP was rightly asking questions about inheritance tax. This is just distraction from that point and, as already mentioned, a demonstration that financial services love pointing out risk, no matter how insignificant or unlikely. It is outdated and has little point other than serve as small print. That's not cheapening your own experience, but rather positioning it relative to considerably more.

A solicitor will highlight these risks to you, and try to mitigate them at your cost and their gain. That's their role. But think how different the process will be if, when asked about your deposit (if you are even asked) you say: 'they're my savings' compared to 'my Mum will give me the money and now I'm worried about inheritance tax'.

The OP has asked for some information, and now he has a lot. Hopefully he'll see the best way through, as not all is useful and relevant.

The OP started out by asking about tax implications, the matter was brought up about declaring the source of the funds and you told him just to ignore it.

His solicitor will advise him on this and in all likelihood there'll be questions asked about the source of the deposit.

The answer isn't that they're his savings.

I wouldn't encourage the OP to, lets use the term mislead them, about the source of the funds.

 

[freak2002]

AHH! Can of worms opened!

The money has come from my Grandads inheritance (to my mum) and she of course is willing to say where it came from and sign the forms/write letters to agree this is the case.

I would rather be honest with all these sorts of things rather than try and be "shady". Looking a bit further I am also going to keep the cheque until its time rather than cash it now as potentially it could be classed as "Capital Gains" and therefore taxed!

 

[Yaayuh!]

It will do no harm explaining the entire scenario to the mortgage advisor/broker, especially if they're anything like who i spoke to at Nationwide, i couldn't of asked any more of them, they were so damn helpful and understanding.