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

[SeaShellsOnTheSeaShore]

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]

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

[breatheslowly]

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]

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]

Just say it's a gift!

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

[SeaShellsOnTheSeaShore]

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]

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]

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

[SeaShellsOnTheSeaShore]

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

[breatheslowly]

Arguably that is fraud.

[Pissfarterleech]

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

[SeaShellsOnTheSeaShore]

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]

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

[thestringcheeseincident]

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

[SeaShellsOnTheSeaShore]

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 :)

[JoJoMummy321]

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]

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]

Thanks for all your experiences :)

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]

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]

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]

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]

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

[YellowDave]

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

[SeaShellsOnTheSeaShore]

Thanks :)

[SalVadorDavi]

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.

[breatheslowly]

In the US mortgages were given out based on false information to people who couldn't repay them. In addition to the mortgage applicant being convinced, based on their circumstances, that they can repay their mortgage, the lender needs to be convinced based on the full circumstances of the applicant.

On a separate note, if the money goes into the Solicitor's client account they may need to do money laundering checks on your parents (they might need to bring ID into the solicitor's office), so it is easier to pay it in yourselves.