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  • FIRST POST
    • JustKeepSaving
    • By JustKeepSaving 13th Mar 17, 5:52 AM
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    JustKeepSaving
    Parents Taking loan deposit
    • #1
    • 13th Mar 17, 5:52 AM
    Parents Taking loan deposit 13th Mar 17 at 5:52 AM
    Hello,

    I'm new on the site and would really appreciate some help.

    We are looking into buying but have not saved the whole deposit ourselves yet. We said we'd wait till then but have come across the perfect property now.

    My mother has offered to give us the money for the deposit now as a gift. I know we'd have to show that it's a gift and that's all fine.

    The issue is that she's abroad and all her money right now is tied into her own property etc. However, having had a special savings account, she can take a very cheap loan for the amount needed and could easily pay this back monthly. She said she'd love to contribute but would find it easier this way than saving a lump sum of contribution.

    Would the solicitor and lender find this acceptable? The money itself would come from a loan, but one we would not pay back ourselves.

    Obviously she couldn't show that she has saved this money for months/years though. It would turn up as a lump sum in her account and then she'd transfer it to me.

    Thank you for your help!
Page 1
    • tacpot12
    • By tacpot12 13th Mar 17, 8:39 AM
    • 458 Posts
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    tacpot12
    • #2
    • 13th Mar 17, 8:39 AM
    • #2
    • 13th Mar 17, 8:39 AM
    If your Mum wants to take a loan out and gift you the money, this should be acceptable to the mortgage company, but there are two things to bear in mind, are you sure your Mum can repay the loan under all future circumstances, and if your Mum might pay inheritance tax in the U.K., you might have to pay some inheritance tax on the gift, where will you get the money from?
    • tacpot12
    • By tacpot12 13th Mar 17, 8:42 AM
    • 458 Posts
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    tacpot12
    • #3
    • 13th Mar 17, 8:42 AM
    • #3
    • 13th Mar 17, 8:42 AM
    One other thing to think about. If you get divorced, your Mum will have given your ex half of the money. Will she be okay with this? Are you okay with this? There are lots of posts on this site where, when it happens, people aren't happy.
    • davidmcn
    • By davidmcn 13th Mar 17, 9:17 AM
    • 4,745 Posts
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    davidmcn
    • #4
    • 13th Mar 17, 9:17 AM
    • #4
    • 13th Mar 17, 9:17 AM
    Obviously she couldn't show that she has saved this money for months/years though. It would turn up as a lump sum in her account and then she'd transfer it to me.
    Originally posted by JustKeepSaving
    For money-laundering purposes it just needs to come from an identifiable source - if it's a loan from a recognised financial institution that's fine.
    • JustKeepSaving
    • By JustKeepSaving 13th Mar 17, 11:12 AM
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    JustKeepSaving
    • #5
    • 13th Mar 17, 11:12 AM
    • #5
    • 13th Mar 17, 11:12 AM
    Thanks for all the advice! Good to know that this would be a possibility but I also appreciate people pointing out possible issues (divorce etc). I was worried about the loan being unacceptable but as it isn't ours it sounds like it might be ok.

    Inheritance tax is something we hadn't really thought about to be honest. Would she have to pay tax if sending it now? She would be transferring us between 20 and 21k.
    • Oakdene
    • By Oakdene 13th Mar 17, 11:16 AM
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    Oakdene
    • #6
    • 13th Mar 17, 11:16 AM
    • #6
    • 13th Mar 17, 11:16 AM
    One other thing to think about. If you get divorced, your Mum will have given your ex half of the money. Will she be okay with this? Are you okay with this? There are lots of posts on this site where, when it happens, people aren't happy.
    Originally posted by tacpot12
    Couldn't it be written into the same letter where is it declared as a gift that it is only repayable under the sale of the house? Therefore if the OP got divorced, the deposit would be repaid in full from proceeds?
    • davidmcn
    • By davidmcn 13th Mar 17, 11:20 AM
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    davidmcn
    • #7
    • 13th Mar 17, 11:20 AM
    • #7
    • 13th Mar 17, 11:20 AM
    Couldn't it be written into the same letter where is it declared as a gift that it is only repayable under the sale of the house?
    Originally posted by Oakdene
    These things contradict each other. So no. It needs to be a no-strings-attached gift.
    • Oakdene
    • By Oakdene 13th Mar 17, 11:23 AM
    • 761 Posts
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    Oakdene
    • #8
    • 13th Mar 17, 11:23 AM
    • #8
    • 13th Mar 17, 11:23 AM
    These things contradict each other. So no. It needs to be a no-strings-attached gift.
    Originally posted by davidmcn
    Then put it into a declaration of trust so that if the relationship fails and the property is sold, OP would have a prior call of the deposit amount after the mortgage is repaid
    • AndyTails
    • By AndyTails 13th Mar 17, 2:06 PM
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    AndyTails
    • #9
    • 13th Mar 17, 2:06 PM
    • #9
    • 13th Mar 17, 2:06 PM
    Inheritance tax is something we hadn't really thought about to be honest. Would she have to pay tax if sending it now? She would be transferring us between 20 and 21k.
    Originally posted by JustKeepSaving

    No, there would be no tax to pay now. Parents can make gifts to their children untaxed. Should your mother die within seven years of making the gift, then the gift would be counted as part of her estate (or possibly part of the gift would be within gift limits, anything over that would be part of the estate). If her estate is then below the tax inheritance threshold - no tax to pay! If the estate is above the threshold, then you'll need to pay inheritance tax on it. But don't worry - in this case the estate clearly has enough money in it to cover the tax!


    In summary, assuming your mother is in good health, don't worry about inheritance tax.
    • teddysmum
    • By teddysmum 13th Mar 17, 4:26 PM
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    teddysmum
    I've never taken a loan, so don't know how long they take to set up, but could timing be problem ?


    The loan won't be needed until the offer to buy is accepted ( not a given) and then won't the deposit be needed straight away ?
    • JustKeepSaving
    • By JustKeepSaving 13th Mar 17, 5:11 PM
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    JustKeepSaving
    The money would be available very quickly. It's basically a special account she's been keeping for years. If you pay a certain amount in on savings they then match that money as a very cheap loan. As she's had it for years it wouldn't take long.

    When do you pay the deposit? I thought if you put an offer in it would then take a while as you need the mortgage etc agreed as well?
    • kingstreet
    • By kingstreet 13th Mar 17, 5:13 PM
    • 30,902 Posts
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    kingstreet
    When do you pay the deposit?
    Originally posted by JustKeepSaving
    In readiness for exchange of contracts you pass your deposit to your solicitor.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • JustKeepSaving
    • By JustKeepSaving 13th Mar 17, 5:29 PM
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    JustKeepSaving
    Ok that's what I thought. Thank you!

    We havent made an offer yet. From having the offer accepted to the solicitor needing the money what's the time line? Would we have two weeks or so to sort the mortgage and transfer deposits?
    • martindow
    • By martindow 14th Mar 17, 8:37 AM
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    martindow
    OP, you mention that your mother is abroad. There is no tax in the UK on gifts but that may not be the same elsewhere in the world. Your mother should check to see if there are any tax liabilities where she lives.
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