Using a gift towards a deposit

GMS

dalts30 wrote: »

It was from my partners parents.

Was your partner on the mortgage?

DVardysShadow

Almighty1001 wrote: »

I am a first time buyer and while applying for a mortgage I mentioned that the majority of the deposit is a gift from my parents and my partners parents.

My lender now needs us to provide a letter from both sets of parents confirming that the deposit is a gift and that the parents have no financial interest in the property etc which must be counter signed by a (our?? / the parents??) solicitors.

The question is, if the entire value of the deposit comes from my account, did i even need to declare it as a "gift" in the first place?

Obviously i dont want to mis-inform my lender, but it seems that declaring it as a gift is going to lead to more costs, with regards to both time and money!

Thanks for reading

In my view [not shared by professionals, for good professional reasons], the dividing line is this:

• If at the time you come to start the purchase process, the money is in your account, it is 'own funds', no longer a gift.
• If the money comes from the giver straight into the solicitor, then it is a gift

_Andy_ wrote: »

Yes you do need to declare it's a gift. Not doing so would be fraud.

A, the rather unhelpful 'F' word again. The christmas gift example puts it into perspective. There is no distinction on the size of the gift. The distinction is on the extent of ownership of the money and the discretion in spending it. The legal term is whether or not it was a gift 'without reservation'.

If you involve the professionals, they will tell you you have to declare it to protect their backsides. If you don't ask them, then you don't need to tell them if you already have the money and it was a gift without reservation. The position is entirely defensible for you as buyer rather than as a professional.

sockpuppet

Until the lender (or the solicitor) sees the large lump sum in your account and asks you to explain where this came from, and asks to see bank or savings account statements showing the 'build-up' of funds to show it has been legitimately saved up.
We have had several problems like this (esp with Abbey) who want to see everything.
If it has been gifted by, for example, your parents there is no need to hide this as it i have never seen it be an issue

(Unless it has been gifted by some random person & not a close family member or as the question asked above; your partners parents and your partner is not actually on the mortgage application - even tho they may well be planning to live in the property)

kingstreet

This is Abbey/Santander criteria on the issue of gifts and loans and I think all we try to do as advisers is pre-empt what's going to be requested so our clients know what to expect right at the outset.

We may request proof of deposit for example if a First Time Buyer was putting down a large deposit. We always require evidence of the deposit where it is £100,000 or more and is not coming from the simultaneous sale of a borrower's existing property.

We can accept deposits provided by gift or loan, but please record full details in the Notes section of Introducer Internet to include:

Gifts
Amount
Name of donor
Relationship to customer
Any protection required e.g. second charge(5)
Any circumstances in which the gift is repayable

Loans
Amount
Lender
Loan terms
Security required
Affordability implications.

(5) If the donor wishes to protect their gifted deposit by taking a second charge we will accept this if the gift is only repayable on the sale of the property. Second charges are not acceptable in some circumstances i.e. Flexible Offset products; low cost housing schemes and shared equity.

We will not accept a gifted deposit if;-
- provided by the vendor (unless an acceptable new build incentive from the builder/developer)
- protected by a Deed of Trust (or similar)
- the person providing it will be living in the property, but is not named on the mortgage
- there is a beneficial/equitable ownership/interest in the property.

An example of a suitable note would be:

“A gifted deposit of £x,xxx from (name of person and relationship to customer). (Name of person) will not have any interest in the property nor protect the gift by taking a second charge”.

If the donor wishes to protect their gifted deposit by taking a second charge, we will accept this if the gift is only repayable on the sale of the property. We will not accept a deposit if it is being provided by the vendor or if it is being protected by a Deed of Trust (or similar).

sockpuppet

I agree.
We always try to pre-empt what the lender is going to request (by knowing the lenders criteria) to let our clients know what they will need (and give them a chance to pull it all together)

There are always several people who think that we are being deliberately 'awkward' or just 'trying to cover our own backsides' when it is in fact the lenders who ask for this information, and if youre not prepared/able to provide it then they, quite simply, wont give you a mortgage.

Quite often people dont realise that criteria has changed quite considerably since they last remortgaged '12 years ago we didnt need all this!'

Idiophreak

callmechar wrote: »

If you were given money as various gifts eg xmas, weddings etc and saved it in cash would you have to declare every person that gave you the money?

You've saved it, so I guess it's not a gift, just "savings" at that point...

GMS

Rather than looking for 'grey' areas would it not be better to tell the truth?

If the lender and/or solicitor asks for proof of deposit then showing them a bank statement in the mortgage applicants name with a one off credit from the month before application of £25,000 would lead to the question:

'Where did this money come from?'

It's my money is simply not enough. My Mum gave it to me is sufficient provided it is acceptable to the lender and a non refundable gift (may be acceptable as a charge but keep it simple)

If the funds were declared as own funds on the application then whilst it is arguably correct, the solicitor would report back to the lender that the deposit was a gift which could lead to a re-offer or even withdrawal.

In both answers the given answer is correct but the lender may view the 'my money' as not true as it came from somebody else.

To ensure the transaction goes smoothly and to minimise the risk of losing any fees it is better to be totally honest as to the source of funds rathet than try to make if fit.