'Gifting' Money

Buttercupcake

Hello All,

I am buying a house, and a fantastic friend of mine is helping me out with some of the deposit. They did the same thing a few years back, and I repaid them in full (of course!).

I remember the Solicitors, for the last property purchase, asking me to get a signed letter from my friend, saying that the money was a 'gift' and that they would have no 'interest' in the property. This was so that the Mortgage lender would not consider the money to entitle my friend to any 'second charge' on the property.

Now that I am about to go through the same process again, I can't find the letter from last time! Can anyone advise me what wording the letter should have (from my friend to the solicitor), so that the gifting of money can go ahead without causing any problems!

Many thanks, in keen anticipation of your response!!!

Yorkie1

There's no specific formula. So long as it confirms the amount and that it is an outright gift rather than a loan, that should suffice. It could also include that they have taken independent legal advice / are aware of their right to independent legal advice and have chosen not to take it.

McKneff

So you paid her back last time, so in effect it was a loan.

Are you paying her back this time, if so, its a loan, not a gift.

Katpin

McKneff wrote: »

So you paid her back last time, so in effect it was a loan.

Are you paying her back this time, if so, its a loan, not a gift.

You need to be careful about this because potentially (if it is a loan) you are being deceitful to your mortgage company. If they find out they could withdraw their offer.

JQ.

Katpin wrote: »

You need to be careful about this because potentially (if it is a loan) you are being deceitful to your mortgage company. If they find out they could withdraw their offer.

Unless either party admits it, how on earth would they find out?

However, it would get very interesting indeed if the OP and friend ever fell out, or their financial situations changed and one needed the cash back. That would be an absolute minefield.

ruggedtoast

There are a lot of tax implications in giving someone a present of more than a couple of grand, do those not figure in this scenario?

sockpuppet

Also, now, the majority of lenders will not accept a gifted deposit from a 'friend' it has to be a close family member.

I would check first with whichever lender you are planning to use will accept a gifted deposit from a 'friend', as most that we use specify it must be someone such as a parent, grandparent, aunt etc etc

We have had a couple of cases declined once this issue has been raised

sonastin

The semantics of whether it is a loan or a gift, in my opinion, rely on what will happen if it is not paid back. If you agree to pay it back when you are able but you are never in a situation where you can return the money and the friend does nothing to make you pay then it is a gift, even if you return it eventually. If the friend expects you to pay back within a certain timescale and they are going to get all legal and demanding on you if you haven't paid it back in that time then it is a loan.

RabbitMad

ruggedtoast wrote: »

There are a lot of tax implications in giving someone a present of more than a couple of grand, do those not figure in this scenario?

From the OP's perspective only if the giver snuffs it and is worth loads of dosh and also leaves the OP something in their Will and there is insufficient residue in the estate to pay the IHT.

Otherwise there are no tax implications at all.

Buttercupcake

Wow, thanks all...and to think I was worried that no one would reply!!! This was my first ever Forum post (ANYWHERE!) and your contributions to my thread have been really helpful in making me think. I'm very lucky....this time around it is a different friend in question, more of an extended family member, and they offered to help me though I never asked. I was planning to release all the equity I could from my home, in order to afford the new house, but they wouldn't hear of it when they are in a position to help.

Ideally, I'd like to think that I will find a way to repay them one day, whether financially or in some other way, but the expectation (certainly from my friend's perspective) is that it is a gift, with no ties, promises or expectations.

Please, if you think of anything else, don't be a stranger! :-)

property.advert

If I were you I'd just stick the cash in the bank and if asked where it came from I would say that I had sold my car / chess board / dog or whatever.

The game has changed and though you may technically be fibbing, the end result is what you need to achieve. And no, if you don't tell and they don't tell, there isn't some big brother going to tell either. You just have to think it through and make sure you know how to explain it all away.