Family Loan

Hi my daughter if buying a property and we want to help her with a loan towards the deposit, she says it can represent an equity loan as a percentage of the house price and when house is sold will be valued at the then market value. What are tax implications on A. lending the money and B: the repayment

Comments

  • [Deleted User]
    [Deleted User] Posts: 35,242
    First Anniversary Photogenic Name Dropper First Post
    Forumite
    Few, if any, lenders will accepted a borrowed deposit.
  • eddddy
    eddddy Posts: 16,288
    First Anniversary First Post Name Dropper
    Forumite
    You can give your daughter a gift, equivalent to, say, 10% of the value of the house she is buying.

    And when she sells the house, she can choose to give you a gift equivalent to 10% of the selling price.

    Your daughter's mortgage lender will probably require for you to sign a document saying that you are giving the money as a gift with no strings attached.


    And obviously, if she chooses not to give you a gift when she sells the house, there would be nothing you could do about it.

    (For example, if things turned bad and you took her to court claiming it was really a loan and not a gift - you would be admitting that you had committed fraud in order to secure a mortgage for your daughter.)
  • enthusiasticsaver
    enthusiasticsaver Posts: 15,445
    First Anniversary First Post Name Dropper I've been Money Tipped!
    Ambassador
    We gave both our daughters a gift towards their deposit and had to sign a letter to that effect.

    There are no tax implications unless you die within 7 years when it may be liable to inheritance tax. If you choose to lend rather than give as said above you will have little recourse legally should your daughter not repay the money.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
  • AnotherJoe
    AnotherJoe Posts: 19,622
    First Anniversary Name Dropper First Post Photogenic
    Forumite
    Few, if any, lenders will accepted a borrowed deposit.

    Santander will (or did three years ago). Nationwide might (they accepted a transfer of that mortgage a year ago). The mortgage was sourced via a broker who knew which lenders would accept this.

    The terms of the agreement are as the OP wanted, returned pro-rated when the house is sold as per the increase in price of the house.

    I am not sure on the tax implications since I doubt I'll ever require it back so i didnt look into that. Whether than counts as loan interest or CGT I'm unsure - most likely loan interest since i have no ownership in the house, just a second charge.
  • TrickyDicky101
    TrickyDicky101 Posts: 3,510
    First Anniversary First Post
    Forumite
    AnotherJoe wrote: »
    Santander will (or did three years ago). Nationwide might (they accepted a transfer of that mortgage a year ago). The mortgage was sourced via a broker who knew which lenders would accept this.

    The terms of the agreement are as the OP wanted, returned pro-rated when the house is sold as per the increase in price of the house.

    I am not sure on the tax implications since I doubt I'll ever require it back so i didnt look into that. Whether than counts as loan interest or CGT I'm unsure - most likely loan interest since i have no ownership in the house, just a second charge.

    If return is based on % of value (rather than a fixed sum ie the original loan) then I would think it could be perceived as a beneficial interest coming under CGT rules (maybe).
  • Clive_Woody
    Clive_Woody Posts: 5,852
    Name Dropper First Anniversary Photogenic First Post
    Forumite
    Hi my daughter if buying a property and we want to help her with a loan towards the deposit, she says it can represent an equity loan as a percentage of the house price and when house is sold will be valued at the then market value. What are tax implications on A. lending the money and B: the repayment
    You might be better off posting your question on the mortgage board or talking with a mortgage broker to see what they advise.
    "We act as though comfort and luxury are the chief requirements of life, when all that we need to make us happy is something to be enthusiastic about” – Albert Einstein
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.4K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.4K Spending & Discounts
  • 234.6K Work, Benefits & Business
  • 607K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards