Sister giving me money for house deposit

[roundandaroundandupanddown]

I was wondering if anyone has any idea (I know I need to speak to a broker - but mine is on holiday and my question isn't urgent - but enough to have robbed my sleep tonight!)

I have an offer on my house and am about to make an offer on a house in a small village I've been trying to buy in for several years, but no luck, so I really want this house.

My problem is I have stupidly tied up £100k that I need in a fixed savings product from which I am 100% not allowed to withdraw from until 12 months time. This was before I decided to move home - I thought it was a good idea at the time.
I am single, so buying the house alone.

I have a small mortgage on my current home which I was just going to port (plus other savings) but now I am going to need to max out my mortgage capability and I am still short of £60k with my £100k savings locked away.

My dsis who I am very close to has offered to lend me the £60k. I would of course pay her back, but she is also prepared to gift the money to me if the rules mean is has to be a gift not a loan.

She lives abroad, but has a Uk bank account with the £60k (it was an inheritance) but she doesn't own a home herself, she is in the equivalent of a council house with life-long tenancy (but no right to buy) in the country in which she lives. She is very unlikely to return to the Uk but she is still a Uk citizen and visits frequently. At some point I can gift her £60k when she needs it.

Would any of this be legal and would there be any tax to pay?

If we were to go ahead we would do it properly and get legal advice, but for now with no offer accepted and the weekend ahead I thought I would ask on here in case anyone had experience of this sort of situation?

She'll have to sign a paper to explain it's a gift, but certainly not illegal. You can still have a private arrangement to pay back. My MIL lent us £10k to move when I was pregnant and signed that it was a gift when it was a loan and we started paying her back as soon as we moved in. They just want to ensure there's no money laundering taking place.

She will have to evidence the funds. Yes she can gift. If she dies within 7 years the money will form part of her estate in the U.K. however I have no idea on the rules in the country she lives in.

It's not illegal.

There will be no tax to pay so long as both times the money changes hands it is clear (ideally with a signed document) that this is a freely given gift without expectations or obligations attached. Without such a document the money comes be treated as income. This requires an enormous level of trust frim her to you, I hope you are worthy of that trust.

Once you can release your money from the place it's locked up, pay it back as soon as possible, don't wait for her to need it. If you were to unfortunately die within 7 years of gifting the money back to her, she could be liable to pay 40% inheritance tax on it which would be upsetting - and the sooner you pay it back the less chance there is of this happening.

I am worthy of her trust otherwise she wouldn't offer, and I wouldn't accept if there was any doubt I couldn't pay it back as soon as those bonds matured.

Amazing to get the response that we can actually do this, it's a nightmare trying to buy at the moment and I am so upset with myself that I locked that money away.

If I was your sister I would expect to see evidence that you had given notice on your savings to release the money snd pay off the loan. I would therefore get a legal agreement in place which details how and when you will pay the money back. That safeguards both of you.

Also you might need to say where you are getting the money from to the mortgage company. They don’t want you paying interest on the deposit as well as their interest!

My Mum helped us when we moved last time. She gave us £15k. She just had to sign a solicitors letter which said it was a gift and that she didn’t expect or desire a stake in the property in return.

I loaned my sister 23k for her house. Had to sign a paper saying it was a gift, she paid me back privately a year later. No other paperwork needed.

We just had 150k from inlaws for deposit. We needed several bank statements to prove the money and that was all that we needed to do I believe.

The first thing I'd do is speak to my bank about the fixed rate account your money is locked away in. They always stipulate you can't get your money out during the fixed term - however it's sometimes possible for a fee.

Ask them what your opinions and go from there.

Done that. Was obviously the first thing I did. They are in bonds not a savings account. Was told under zero circumstances apart from my death would the money be released back to me. I do remember seeing it in the terms when I signed and I've seen it on their t&cs now too.

Thanks everyone, I'm over the moon that actually something might go my way for once!

Now I've got to get through the day on zero sleep as I couldn't sleep at all last night without worrying about this.
Luckily I've only got a kids party in the blaring sunshine to get through...

@roundandaroundandupanddown
But you can get the money with 1 years notice? It’s not locked away forever.

As an aside, most financial advisers would have suggested a variety of pride taking if this represented all your savings. You should not have everything in one basket you cannot access for 1 year. We have a huge variety and always have money available quickly.

Aaah! A variety of products if this represented all your savings!

@TizerorFizz yep only locked away for another year - but obviously the house I want is for sale at this moment.

I only locked away about 60% of my cash savings - but I need the whole lot for the new house and moving costs etc.

i did this for my sister. we set it up so that I owned 10% of her house and then when she had enough cash (4 years later), she bought me out. She didn't pay me any interest but she did pay me back more than I put in because house prices had gone up a bit in the 4 years. but if you go for that option, it might affect your mortgage options.

Actually, she can’t just gift you the money without you paying income tax on any amount over £3,000. There are further tax implications if she were to die in the next seven years.

I would therefore set it up as a loan, repayable in one year, with a very low interest rate. That way there is no tax to pay and it would legitimately be seen as a loan by HMRC. Your mortgage broker would explain to the mortgage company that it would be repaid from the £100k in the future (they get twitchy about you taking on more debt).

If you intend to “gift” the money back then it’s a loan, not a gift, no matter how you want to dress it up, so you will be committing mortgage fraud if you state that it’s a gift.

There is no tax on gifts in the U.K., so no, she would not have to pay income tax.

No, declaring it as a gift when it is a loan is fraud.

This is not true

As people have said, there is nothing to prevent your sister giving you the money but if you say it is a gift when it is a loan, that is technically mortgage fraud. As you can see from other posters who have done the same, it’s a type of fraud that occurs all the time and most people get away with it. It’s up to you if you want to risk it. It’s unlikely to come to light but if it does, technically you could be prosecuted.

As you said lots of people do it, my ex did when he bought his first place with a loan/gift of a deposit from his parents.

The other thing to consider is that having a gifted deposit does impact on the mortgages banks roll offer you