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.

They just need to know where the money is coming from and she would have to fill in a form and provide details of her bank account.

Conveyancer here - I haven’t RTFT as on a very brief lunch break. You will have issues with a mortgage lender, but your friend must also be made aware that if it is a loan she will need separate legal representation and a loan agreement drawn up. Or, she can declare as a gift and will not need separate legal representation. However for both scenarios she will need to be ‘AML checked’ which will involve providing documentation to prove her source of wealth and lots of documentation to prove her source of funds, together with ID docs. It is a very intrusive process, which she may not be aware of and may not be happy to do.

The mortgage company are legally bound to do a Money Laundering check. You’ll need to show (or your friend will) where the funds have come from, whether it is legitimate funds etc.
but as long as that’s legit, can’t see a problem.

I was thinking this too

We did this and borrowed money from my SIL. We had to get an agreement in writing drawn up by a solicitor to say where the money was coming from and it had to be signed and witnessed by each side. We also had to say what would happen in the event of any of us dying before the money was paid back in case of potential inheritance tax obligations etc. The only thing that may be a problem is that my SIL had to answer questions and provide bank statements going back 12 months to show where she had got the money from and we obviously got to see these - she did also find some of the process quite intrusive, when we had to keep going back to her with constant questions and paperwork. Your friend may not want the hassle, or for you to see the entirety of their finances, so make them aware of that before you accept the offer. It’s not just a case of them handing it over and forgetting about it until you give it back.

Yes, this is exactly what I wouldn’t want to burden her with. She’d be completely happy to just handover money and have it repaid whenever it gets repaid, but I think would be apprehensive if she has ‘hassle’ to go with it.
Bonkers that there is so much scrutiny over gifting money!

My parents did this for more brother - it’s a bridging loan, totally normal

Are you going to say it is a gift even though you intend to pay it back? If it is a loan it will reduce the amount you can borrow on the mortgage because it's another debt. If it has to look like a gift I think you would need something in writing to prove it is a gift, would your friend do that? Or perhaps you could phrase it as a bridging loan against your other property, but I think that would need the agreement of the mortgage company on that house.

How is bonkers....

Honestly I don't know how some people get on in life if you think it's bonkers a bank would question where and why £200k just landed in your account.

It’s money laundering 101. In your case it (presumably) isn’t a way for your friend to launder money; but I’m sure you can imagine the issue if property buyers were allowed to be “gifted” large sums of money by “friends” without any interrogation of where that money had come from, with the intention to hand “clean” money back to them afterwards from a traceable source?

We don’t need to imagine, half of London is owned by them as a living example 🤣

Estate agent here. As long as you’ve got a broker or lender who has confirmed you can definitely re-mortgage and can confirm this to the agent selling, that would be enough to get an offer accepted and you start the legal work. Currently sales are taking 2/3 months at least to go through, so you’d get your re-mortgaged funds before exchange. Happens regularly. I don’t understand the urgency to have the deposit immediately.

They always fraud check where your deposit comes from. My parents gifted my brother a similar amount and not only did he have to show the transfer and give their info and identities, they had to supply personal info about where that money originally came from - it's part of anti money laundering checks. So your friend would have to say its a gift, legally cover that in documentation and share where the money was originally earned with your solicitor. Maybe she is up for that. However, I imagine when it was raised she was thinking it'd just be a case of popping the money over and job done. It was a real pita for my elderly parents and very frustrating as it came from a variety of sources and each needed verifying.