Gift from parents?

ps124

Clapton - Sorry, I thought I did.

I can't have all of us on the mortgage as because of my parents age and earnings, we would be restricted on the mortgage amount and the years we could take out. I was advised by a friend who is also a mortgage advisor that if I wanted to proceed with such an idea, I could do so using the gift idea. However he wasn't aware of the "small print", hence my situation.

Thrugelmir - your right, ive just found out that they can't make a gift to me and then continue to benefit from it, ie the house.

What can I do now as im in a pickle?

kingstreet

The parents living in the property after gifting the purchase money doesn't stop it being a gift for Inheritance Tax purposes. However, it would be a "gift with reservation" as the parents continue to derive a benefit from it.

Normally, a gift would be a potentially exempt transfer with no IHT to pay provided the donor lives for seven years from the date of the gift. However, in this case it simply leaves the value of the gift in their estate for IHT purposes and it stops the seven year clock starting to tick.

ps124 - So if the lender you chose won't do it, change to one that will. Did you check beforehand?

CLAPTON

you need to speak to a lender direct about all 4 being joint owners and joint mortgagees

there seems to me no reason why the ages or income of your parent is relevant if your own income is sufficient for the mortgage

p00hsticks

ps124 wrote: »

trying to be good...

Thats interesting. But surely the statement that says they have no interest in the money they have given as a gift should satisfy the lender's concerns?

But even if they've signed to that effect, is is that statement really true ? Their money is being used to buy a house which they are expecting to live in - surely that counts as an interest in practice ?

trulysaintly

CLAPTON wrote: »

you need to speak to a lender direct about all 4 being joint owners and joint mortgagees

there seems to me no reason why the ages or income of your parent is relevant if your own income is sufficient for the mortgage

If one of the applicants is in their 50's and you want a 30yr mortgage term, it's relevant whether their income is being used or not.

Most lenders won't allow the mortgage term to progress beyond Age 75 - as a result the OP (if parents were 50) could well be restricted to a 25 year term.

In a situation where more than 2 applicants are involved only 2 of the 4 incomes would be used.

If an applicant is within 5 years of state retirement age, then the assessment is based on their predicted retirement income, not necessarily what they are earning when the application is made.

An independent adviser would be able to cross check all of the lender's criteria in the market.

Going direct to just one lender could be a fruitless and time consuming exercise.

I know because I used to work for them - if you don't fit their criteria, it could be a no. But that doesn't mean someone else won't do it.

ps124

hi all...thanks for the replies.

Kingstreet - I didnt check beforehand. I've gone and exchanged on the property. I also stated in the application that the house im going to buy, i am getting the money for it as a gift from my parents. The weird thing is, I signed the paperwork to say that the people living in the house are my parents and myself and wife, and they havn't questioned it!?!

Clapton - see above, i think its too late speaking to the lender now. I would only draw unwanted attention to it.

Poohsticks - Yes it is as im an only child. However, even if it wasn't...why would the lender care? They have a signed statement saying that, and my parents have signed the paperwork to state they would also have to vacate should i forfeit on my mortgage.

I'm wondering, I have taken out a 30year mortgage, if it all passes through ok without the lender saying anything, could I not add my mum to the policy later on? I mean after completing on the house?

kingstreet

ps124 wrote: »

Kingstreet - I didnt check beforehand. I've gone and exchanged on the property

You've exchanged contracts? Are you sure? It would be very unusual for a solicitor to permit exchange without a mortgage offer. What's the completion date?

Back to the mortgage issue.

It's probably better in these circumstances to establish whether (or not) a lender will accept such an issue before you make an application. A whole load of fruitless credit searches on your file isn't going to help if you do this three or four times.

I'd suggest contacting a whole market broker to see what options are available to you.