First house advice

PJJ01

Hi,

I am buying a house with my partner from a family member. This is only a small house which is valued at 80,000. My family member is happy for me to have this house for 70,000. I am only able to get a mortgage for 60,000, What is the maximum "Gift Deposit" my family member can give me, as he understands I am unable to pay the deposit and wasnts rid as part of a quick sale so is happy to gift a deposit to me.

Thanks

Lavendyr

I don't get it. If the same family member who is selling you the house for £70k is going to give you £10k deposit, why don't they just sell it to you at £60k? Or is this some kind of attempt to get a better LTV for a mortgage?

PJJ01

my grandad who is selling up, understands I can only get a 60,000 mortgage. Therefore will gift me the 10,000, where I will pay him pack. If he sells the house for 60,000 - I will have a deposit to pay for the mortgage anyway. It was a friend who informed me of the gift deposit, so I am trying to find out how this works and what is the maximim I can be gifted.

I hope this makes sense

girl_withno_name

I'm sure someone will correct me if I'm wrong, but if the intention is for the "gifted deposit" to be repaid then this wouldn't necessarily count as being "gifted".

Also - what LTV are you looking to obtain? With a 10% deposit, an additional 10k on the purchase price would only require an additional £1k on the deposit.... so you'd only need to find an extra £1k and not the £10k your Grandad intends to provide.

PJJ01

although this is intended to be paid back in the long term, the gift is to help speed up the purchase / sale of the house.
The idea was for my grandad to sell the house for 70,000 - gift 10,000 to take it to the mortgage maximum of 60,000 so that I have no upfront deposit to make. This is so that the money which I have saved up can be used for modernising the house and furnishing. Could you advise if this is possible.? as I am new to this and trying to gather as much information as possible to help with buying my first house.

Lavendyr

If there is an intention to repay the £10k to your grandfather then the mortgage company are likely to see it as him having an interest in the property and are unlikely to accept it as a deposit.

Gifting a deposit has fewer issues than borrowing a deposit, but if you have to pay it back, you would need to declare this to the mortgage company and to your solicitor.

I am aware of instances where those gifting the deposit to the buyers have had to sign a legal document to state that the deposit was freely gifted and repayment would not be sought, before the lender would be satisfied (this may vary depending on the lender obviously but a friend of mine had to do exactly this).

This would mean your grandfather would have absolutely no right to recover that money from you - it would be *your* money. If your grandfather's genuinely happy to *give* you, free of obligation, £10k, that's great, but that doesn't sound like what is being proposed.

It also sounds as though he is accepting an offer at under-value from you. This could have IHT and possibly (if not his main residence) CGT implications. For the same reasons, you and he need to be clear on the status of the £10k "deposit" - if it is a gift it could be subject to IHT if he dies within 7 years. You and he are both best off seeing a tax adviser to help you understand what this will mean for you.

Why don't you use your savings for the deposit and his money for the work that you want to do? That may make things less complicated (although any cash gift he makes to you will have the same questions around IHT).

PJJ01

Thats great thank you.
If my grandad does decide to gift this (with no intention of me paying back, therfore no need for a deposit for the mortgage from myself) is there a limitation on what gift he can give.?

Gonzo33

If it is done as a loan instead of a gift your Grandfather will need to sign a Deed of Postponement giving the mortgage lender first charge and him second.

PJJ01

If this is done as a gift as opposed to a loan (with no intention of me paying back, therfore no need for a deposit for the mortgage from myself) is there a limitation on what gift he can give.?

Gonzo33

Not that I know of. Although you have to bear in mind that if he died within 7 years of gifting that deposit it would be classed as part of his estate and there may be IHT to pay on it. Obviously that depends on how much he gives you, how much his estate is worth etc etc.

PJJ01

ok that is great thank you all for your help