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What are the implications of someone other than the Mortgage holders paying the deposit?

(26 Posts)
SeaShellsOnTheSeaShore Sat 01-Oct-11 19:15:50

We lost all the cash we paid for a deposit and into our repayment mortgage on our first house thanks to the housing market crash.

We have to sell now.

A place we like would need £22k deposit, of which we have 4k savings and £2k from our house sale after paying solicitors etc.

If the remainder was paid by parents, what would be the tax implications, how would we convinced the banks etc etc of this?

Any help gratefully received!!

tiredemma Sat 01-Oct-11 19:18:20

DP's parents helped us with 15k. We had to send a letter stating it was a cash gift.

breatheslowly Sat 01-Oct-11 19:23:46

Would it be a gift or loan? If it was a loan then you would need to declare it as part of your mortgage application as they tend to ask about loans. You would probably want a formal agreement about it.

This article is a good summary.

SeaShellsOnTheSeaShore Sat 01-Oct-11 19:34:46

It is intended to be a loan. Both our parents are divorced, so we could potentially be asking £5k from 3 people. We would pay back asap, as I have just gone back to work after second mat leave and our financial circumstance should stabilise over the next year.

Pissfarterleech Sat 01-Oct-11 19:37:10

Just say it's a gift!

The mortgage companies don't care as long as the mortgage is paid.

SeaShellsOnTheSeaShore Sat 01-Oct-11 19:39:42

But I thought if you had a gift over 3k cash from someone it had tax implications (happy to be corrected, I have no idea and this all makes me sick!!)

SierraMadre Sat 01-Oct-11 19:47:50

It does, but it's an ingeritance tax issue. So long as your parents live for 7 years after the date of the gift, there should be no IHT.

DaisySteiner Sat 01-Oct-11 19:52:53

And if there is IHT then it is paid from the estate, not by the recipient iirc.

SeaShellsOnTheSeaShore Sat 01-Oct-11 20:02:08

Ok, so as far banks go, it's a gift, as far as persuading my parents go, it's a loan?! grin

breatheslowly Sat 01-Oct-11 20:52:40

Arguably that is fraud.

Pissfarterleech Sat 01-Oct-11 20:55:07

Arguably, who gives a shit providing they can pay their mortgage.

SeaShellsOnTheSeaShore Sat 01-Oct-11 21:00:40

Lighten up Breathe I was joking! The nature of it would entirely be down to our parents and what terms they want, it's their money.

breatheslowly Sat 01-Oct-11 21:02:03

Didn't the recent economic crisis start out with people making things up for mortgage applications?

thestringcheeseincident Sat 01-Oct-11 21:02:45

Inlaws gave us £30k and we weren't asked about it at all.

SeaShellsOnTheSeaShore Sat 01-Oct-11 21:11:49

Yes, but I wasn't one of them, I have lost 24k and am now scrabbling around trying to get out of the shit as we have had to relocate 3yrs ago, have rented it out and struggled with it all and now are trying to get sorted.

This isn't aibu, I was asking for legit advice, sorry I cracked a bad joke smile

JoJoMummy321 Sat 01-Oct-11 23:00:27

Absolutely say it is a gift as far as mortgage lenders are confirmed. As long as you can afford your mortgage payments as well as the payments on the loan from your family this will be fine. Don't make things harder for yourself!!!

Gonzo33 Sun 02-Oct-11 04:46:17

My Mum and Nan gave me money towards a house purchase and they placed a second and third charge on the property (deed of postponement). I am now selling the house ten years later. My solicitor will write to them to ask if I owe them anything, like they would a lender.

SeaShellsOnTheSeaShore Sun 02-Oct-11 06:46:24

Thanks for all your experiences smile

How do the practicalities work-do they pay the bank directly on the days leading up to completion or do they pay you so the full deposit is coming from one bank account?

RedHelenB Sun 02-Oct-11 15:38:01

We got a loan for a deposit & never declared it to the building society. 15 years later & it's all paid off, mortgage up to date etc.

SingleMan25b Sun 02-Oct-11 23:42:07

I have a feeling there might be a tax liability if the parents die within 7 years of giving the gift if it's over 3K7. However, I'm no expert on tax!

lostinwales Mon 03-Oct-11 11:07:16

They can give you and your husband 3K each pa as a gift and have no tax implications. So by my calculations you can have 18K from the three of them before it becomes an issue for tax.

I think the tidiest way to do it would have them pay it into an account that the solicitor holds which is what happens with the deposit after contracts are exchanged and before completion IIRC. This may be wrong, I am quite happy to be told this is BS. Give your solicitors office a call.

Gonzo33 Mon 03-Oct-11 12:33:19

My Nan and Mum paid it directly to the solicitor when the solicitor requested funds for the house.

YellowDave Mon 03-Oct-11 14:35:38

I agree with lostinwales smile. We have been in a similar situation - I'll pm you as would prefer to to put the details here smile

SeaShellsOnTheSeaShore Mon 03-Oct-11 15:25:00

Thanks smile

SalVadorDavi Mon 03-Oct-11 17:06:39

grin at pissfart's comment. Breathe, this is not remotely the same. Should a house be repossessed in a case like this (SeaShells, of course I don't mean you, but for argument's sake as I get irritated by stupid comments like that above where someone can't even be bothered to look at actual facts), the bank should be covered by the value of the property. Lending criteria were too liberal before, which has now changed considerably. Main issues affecting the "actual value" of secured debt banks traded before were buy-to-let mortgages given too freely, insane income-multipliers, excess mortgages (anyone remember the 125% ones?).

Anyway, rant aside. Seashells, we did something similar - the deposit amount was transferred to our lawyers' account in two transactions (ours and the gift/loan amount). Mortgage provider transferred remainder to this account, and all then on to seller. If I were in your shoes, I'd see if I could persuade the parents not to have a loan agreement on paper, but even if they insist, it sounds doable from previous posters.

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