Deposit gift

halfajack

Hi,

In last stages of mortgage app - ie a week after move in date - and the lender keeps asking for more info. A family member is giving me a large amount of money to contribute towards the deposit. The lender now wants a letter from this family member confirming it's a gift and they'll take no interest in the property. Family member is happy to do this but is concerned there may be tax implications in doing so. Anyone know? Getting very stressed!

sammatty

If it is a gift of cash there is no capital gains issues, by cash I mean that the gift is not in the form of other assets.

If the person gifting you the cash lifes for over 7 years, there will be no inheritence tax issues.

leewigan

The main thing that the lender will be interested in is that this is a gift and they will not be expecting payment back with interest.

They obviously have to take into consideration your repayments and take into account anything else you would be oweing once the mortgage starts

holly_hobby

The lender wants to assure themselves that the donor is providing capital without any caveat of its repayment in the form of capital repayments or in exchange for an interest in the property. It is a completely standard requirement and nothing to be unduly concerned about.

There is no income tax payable on a gift for hse pch - unless you place it in a bank account and gain interest on it (which is taxable) - so have the monies directly to the solicitor to avoid this. CGT is a tax levied on any monetary gain realised from the disposal of an asset (subject to allowances) - and is therefore irrelevant to the matter in hand.

If the donor's estate on death exceeds the nil rate threshold, then any disposal of assets during the proceeding 7 yrs of death, will be considered as part of the estate - and subject to an IHT PET calculation.

The amount of tax due on the gift, if gifted within 7 yrs of death, will be on a sliding scale in accordance with PET regs.

If the donor's estate is liable to an IHT liability, you may want to consider effecting a "gift inter vivos" policy, which is payable to the policy owner on the Donors death, and has a decreasing benefit in accordance with PET regs, and is specifially for PET and estate planning issues - sounds complicated but quite simple, and a suitably qualified adviser will be able to assist with this.

Hope this helps

Holly

co123456

Just had this when selling my place to 1st time buyers whoose parents had stumped up the deposit. My estate agent said that lenders are becomming more picky. This was also within the last week or so before exchange of contracts. I wish the lender had sought the undertaking for the deposit earlier.

jackyann

When in this situation, it is easiest if the kind family member gives you the money in advance, then it is yours and no business of the lenders ( from your point of view, as said above, inheritance tax is another story).
However, I know some family members worry that if the sale falls through, their money is sitting in your account, being tempting!

When my parents bought their first house, just after WW2, my grandad handed over the entire cost of the house in cash ( race-course winnings). Those where the days!