Deposit gift from parents

holly_hobby

A lender will be nervous re gifted deposits, where the borrowers are effectively not putting in any, or very little deposit from their own funds. As it is a perception of the lender that the borrwer(s) may have less incentive to maintain the mge during times of financial strain, the less direct and personal monetary loss they may incur on a possession order/forced sale. (notwithstanding the 12 yr legal pursuance of any shortfall to loan of course !).

In this case, I see no such problems, the only caveat of the lender will be that the Donor confirms the sum to be a "gift without reservation" - which is standard industry practice. (as without such a declaration, the Donor may seek to mount a future proprietary claim on the property.

Hope this helps the OP - and good luck in their new home !

H

lucylooby123

We had to have a letter from donor dissolving them of any claim to the property or the money WITH the mortgage application, it wasn't stated on the application notes, but the broker told us we would need it down the line and that if you don't declare it from the off it can make lenders twitchy.

Thrugelmir

The_J wrote: »

Actually starting to !!!! me off.

Then please do.

I'm getting bored having to explain why you are wrong. You couldn't even read the Mortgage Works website properly in your haste to chastise me.

Noticed that you ran away from that thread. Shows how tough your really are.

paulmapp8306

got a little out of hand this hasnt it.

i can state - tired and may have missed a post - that lenders dont care too hoots where the money comes from. the only people who do are the government IF the people giving the gift die within 7 years of giving the gift.

if that happens the government will try to include the gift in the estate for death tax purposes. The way it isnt included is a letter from the "giver" stating it was a gift for the purchase, or part purchase, of property.

Now - that means property NOT stamp duty, fees etc - it must be spent on the bricks and mortor. so - use all the £18k for the deposit and pay the fees from the £50k you have yourself. Get the letter, and keep it.

im basing this on 4 months of research (including solicitors my parents questioned) when they gave me £18k as a deposit for my first home - which I have just bought with the help of that gift.

Thrugelmir

paulmapp8306 wrote: »

i can state - tired and may have missed a post - that lenders dont care too hoots where the money comes from.

Read up on Insolvency Law. Not IHT. Totally unrelated topics, though both potentially impact on monetary gifts. There is often a failure to view a topic from the widest possible angle.

got a little out of hand this hasnt it.

Totally down to one individual. Who recently joined the forum and wishes to be top troll. Shame as it spoils the forum for the majority. That treat each other with respect even if views do differ,

holly_hobby

paulmapp8306 wrote: »

i can state - tired and may have missed a post - that lenders dont care too hoots where the money comes from. the only people who do are the government IF the people giving the gift die within 7 years of giving the gift.

That is hugely misleading and wrong - the OPs q related to lenders and their view of gifted deposits. Of which lenders DO very much care re the source of deposit (if not obviously from a house sale or savings acc held with them).

The reasons why ( ex ML regs) I discussed above.

Re the gift element and probate - you are getting into the realms of PETs and estate planning, which is nothing to do with the Lenders review of the application whatsoever, but MAY be relevant to the Donor's estate on disposal (subject to regs) - to which end I would suggest if the Donors' estate is likely to exceed the nil rate band on death they take some estate planning advice, re the implications of stating to the lender the gift "is without reservation", yet citing for PET regs, that the gift is not actually a gift at all, but was used in the Donors own interest to effectively purchase a share in the property itself.

I've no doubt as you say that you did this, but I wouldn't wish the OP to fall foul, and this is ONLY relevant if any case if the Donors estate is likely to exceed the nil rate band - if it does there are protection policies that would be much more suitable and simplistic than the above, such as a "gift inter vivos" policy - which is specifically designed to cater for PET situations (and is in essence a 7 yr DTA policy reducing in line with the calculated potential liability)

Insolvency - the TIB would investigate gifts made by the individual within the preceeding 5 yrs before either a voluntary or forced BO is effected - and whom have the legal juristiction to reclaim such monies from the Donee, for the benefit of the Donors creditors - but hopefully our OPs Donor's aren't planning to go belly up in the near future - but a salient point raised by Thurls. in order to cover all bases !!

Hopefully none of the above is relevant to our OP - and hope the info given by all has helped them understand the process.

H x

paulmapp8306

Thanks for that clarification - though it has now made me a little worried so - without derailing the OPs thread - Id appreciate some comment.

My deposit is made up primarily of two eliments.

1. A gift from my mum - which is actually my inheritance from my dad released early (should be held until my mums death).

2. Inheritance my wife received on the death of her cousin.

We have £36k total - of which £18k came from each source. the deposit is £22400 (20% of the property), with the remaining money being used for fees, removals, and some work we want to do to the property.

Im assuming that the £18k inheritance is deemed as "from the lender" as it is in reality our money even if we didnt actually save it, so using that inheritance as the deposit money, with a further £4600 of the gift shouldnt be an issue?

I also have access to £8.5k from the forces - which is early payment of a a part of my discharge money payable from that lump sum on discharge (0% interest until then), so while we need the full lump ultimately (for various reasons). We applied for that in case the inheritance money hadnt arrived before the deposit was due. So using that along with the inheritance money for the deposit - and keeping the gift money back to replace the sum borrowed against my lump, and to pay fees, movers, and house improvements should also not be an issue?

I also have a letter from my mum saying the gift is for property which she reliquishes any claim on - so Im guessing that would help too?

The source of our finances has not been declaired to the lender as my mortgage advisor said it wasnt necessary, and they havent asked. Should I provide the information voluntarily anyway?

paulmapp8306

Oh - incidentally, the gift £18k as been in my bank account (though thats not with the lender) since Early Jan this year - if that makes a difference.

The_J

No, you do not have to provide any information voluntarily, if they need it, they'll ask for it. Some lenders do not care about the source of the deposit.

You will be absolutely fine. There is a lot of misinformation on this thread.

To clarify: Lenders care about the deposit for 2 reasons:

1) Money laundering
2) Overriding rights to the property

There's a lot of mortgage fraud at the moment and although the market is relatively low risk compared to others they still have to be vigilant and the repercussions if they aren't are severe. Money Laundering checks usually only kick in for larger deposits.

The second is more arbitrary and is often down to lender interpretation. Nothing has ever been fully tested in court but lenders are obviously concerned about people having a say in a property without being liable for the mortgage because it makes repossession harder. There is so much small print that this is impossible to argue but it still doesn't stop them from being cautious as it only takes one case for floodgates to open and the complainers to jump on the bandwagon.

The other thing you may see people say is that lenders want to see evidence that you can build a deposit. This isn't really accurate. They may say it to justify lending at a lower LTV but it is never the primary reason.

holly_hobby

As stated by J, only answer questions asked.

If they don't require confirmation of source of deposit - then there is need to discuss. (albeit your Sol will have to ask qs to satisfy ML regs).

ML and proprietary rights are the main crux re source of deposit, but from a lenders point of view and where the majority or all of the deposit is from a 3rd pty gift (and depending upon the LTV ) - they can get a tad nervous due to the underlying reasons I noted earlier. Specifically where the LTV is high and the credit score is tight. Of course I can only speak from my own previous experience re this, and what was established from UWs during my own packaging and placement days. When to be fair readily available LTVs where 95% + , so they did have v high exposure to begin with, which is where their concerns lay. However the same uw markers in todays market may not be as thorough/stringent, as a result tighter uw criteria (inc lower mulitples), and the overall lower max LTVs currently being marketed.

Anyhoo, its horses for courses - in that situ your broker would be aware of who are tighter than others, and therefore choose your lender for application accordingly.

Thankfully the OPs situ has no such issues .. and hopefully they'll be in the new home in the very near future.

Hope this helps

H x