Tax on gifts vs family loans

gunn67

Hi everyone. I've a bit of a conundrum here. The facts are :

Buying a house at £495k
Mortgage of £295k and deposit of £200k
Now...£90k of that deposit is coming from my mother as a loan. She doesn't want any interest in the house so, I guess, it's 'unsecured'. The solicitor, though, has set the cat amongst the pigeons by saying that they are obliged to tell the mortgage lender of this loan and it could wreck the deal (we are due to complete in under two weeks!). They suggested that the money is gifted with an accompanying Deed of Gift, which we have begin to complete but my mother is concerned about the tax situation.

Can anyone advise us of the best way to proceed, preferably without having to tell the mortgage lender anything? I would have hoped that if we drew up paperwork confirming that the loan is unsecured then that should do it.

Any advice welcomed.

Duncan

le_loup

Your mother can give you any amount she likes with no tax implications unless she dies within 7 years or requires council care when she's older. (Look up Inheritance Tax and Deprivation of assets.)
No deed of gift necessary.
If you want to give her money later on the same rules apply.

CLAPTON

in general a mortgage company will not accept a loan as a deposit whether or not it's secured

a gift however is a different matter and should provide no difficulties
I see no need for a deed of gift

yelf

I did the same thing when i bought my first house: loan from mum which i am paying back (we even had a solicitor draft up a loan agreement).

The mortgage company were never told. They cant find out either as it wont show up on a credit search. Baring in mind your mum is very unlikely to pursue you through the courts etc, i would change solicitor or tell him to do whats in YOUR best interest and not his (ie: charging more for drafting a deed)

noh

Not informing the mortgage lender of a loan obtained for the deposit on a property would potentially be fraudulent.
The OPs solicitor is acting in his clents interest by informing him that they would be obliged to inform the lender.