AIBU to consider borrowing a house deposit from a friend temporarily?

[Borrowingfromafriend]

We’re looking to buy a property and need £200k for a deposit. I have quite a bit more than this in equity in another property however, this will take a while to be ‘freed’ up and I need to move ASAP if I want this property.

A friend has suggested borrowing the £200k from her (she has a net worth of £50m+ just to put in perspective - this isn’t her entire life savings or anything). How would we go about this for a mortgage? Would it even be feasible? I would pay her back in full as soon as the other property sells.

You’ll need a gift letter from her I imagine as the bank may not accept it if it’s planned to be paid back.

Seems a bit more complicated than I thought. I thought it would be as simple as her paying the money into my bank and signing to say that it’s a gift.
I wouldn’t want to inconvenience my friend if she would have to do more than this. She wouldn’t want legal letters etc drawn up, it would be an informal agreement.

No - gifts are not income, they are gifts!

It might be as simple as that, but you need to check the gifting rules from the lender. She will also be subject to AML checks ie. she will have to prove the source of her funds.

Never ruin a friendship by borrowing (or lending) money

I couldn’t get into a financial arrangement like this with a friend. There are too many things that could go wrong and could jeopardise the friendship.

It really wouldn’t be like that. I have the funds to pay her - they are just tied up for a few months. She isn’t in any need of the cash any time soon and knows I wouldn’t mess her around.
We don’t actually speak super often, barely every week these days. It’s not like we’re at risk of falling out or anything (and of course I would still repay her even if we did!).

Of course it’s legal. It can be treated as a gift. Gifts don’t solely come from parents.

I don’t think it would necessarily be quicker than ‘a few days’.

I have never had a bridging loan so don’t know if that is actually true. But I also know moving large amounts of money can be challenging.

Your friend isn’t keeping her 50 million in an instant access current account. And if she was there are limits on payment amounts usually on these accounts.

Do the have mortgage approval already @Borrowingfromafriend

They’re not tied up for a few months though. You could remortgage in a matter of days.

I was told it would be 8 weeks.

Surely asking a friend for £200k at short notice is about as ‘inconvenient’ as it gets!
However, the friend would need to prove to your solicitor where this money has come from, will need to declare that it is a gift not a loan and that they will have no claim on the house.
Sometimes in life, we can’t have what we want when we want it.

No, you don’t have the funds. Having the funds means having cash accessible at a couple of day’s notice.

I was in a similar situation however instead of a loan I put the friend as a tenant in common - owning a % of the property equal to the amount they give/ cost of property. Whenever your other property sells you can ‘buy her out’ - I don’t know if you’d have to pay stamp duty on her part too though, you’d need to check.
the tenancy in common was signed with a lawyer and each of us had our own lawyer.

Who told you this?
If you had bothered to contact your bank today who you have your mortgage approval with... your solicitor would have had the funds by Monday.

It’s entirely up to you of course whether it’s worth the risk - after all only you know what the friendship is worth.

This! I borrowed a similar amount for an extension - remortgaged and had the money in my current account in days.

When our son was looking fora house we gave him half the deposit (not anywhere like 200k, was under 10,000.
We had to sign a form stating that we would not try to recoup our money so ut was basically a gift.
I assume that its to do with if we demanded our money back and he had to sell, or if sonething went wrong and he defaulted on the payments, the property would be property of the bank and we would have no right to claim back our 'gift'.
Definitely get it checked by a solicitor and ensure an airtight agreement is done.

You need to get proper financial and legal advice not mumsnet! There will be implications and you would need a contract drawn up to say how and when you will pay her back! Then there’s the issue of money laundering which obviously this is not, however financial institutions may see it differently!

I believe that your lawyer needs to advise you. I was gifting money to my DD as her deposit. I had to sign some paperwork confirming where it came from .

That’s what we did with my husband‘s aunt’s money. The solicitor still needed to check the legitimacy of the funds though and my husband‘s aunt had to go through some anti money laundering checks. The different is though that we didn’t need a mortgage at all, the other 50% came from the sale of our property. We are paying the aunt back monthly now.

Tbh most banks would not touch it with a barge pole. most major lenders have policies that only allow close relatives to “gift”.

Your options would be:

• you declare it as secured loan and your friend places a charge over your property. Most banks won’t like this as it majorly messes with your affordability.
• You declare it as an unsecured loan, your bank will want to see a loan agreement, but again most likely won’t accept it due to affordability.
• you declare it as gift (unfortunately many people will recommend this- this is MORTGAGE FRAUD if you are caught). As I said before most banks won’t accept this as she is not a close relative and again is a major flag for money laundering. You’d need a specialist broker.

We almost needed to do this with a wealthy friend and we would have just got everything drawn up properly by a solicitor.

It shouldn't be an issue - we had to do similar back in 2007 when we needed the equity out of our house for a property we were moving to and our own house sale fell through. We borrowed £100k temporarily from a family friend and our bank just made them sign a gift waiver. We then repaid our friend 3 months later when our house sale went through. It was buttons to our friend and they didn't care if or when we repaid them, but I was keen to sort it asap.