Sourcing deposit - dodgy?

cosmicbeard

Greetings all,

Does this method of sourcing a deposit for a mortgage sound dodgy/illegal?

1. Employer lends my parent money via beneficial loan, repayable on death. (Is this possible?)
2. Parent gifts me the money.
3. I take 4 year pay cut, effectively paying back loan.
4. Employer writes off loan to parent.

I am aware of the risk of taking on a mortgage with what is effectively another loan, and therefore 100% LTV. I have the income to pay the extra comfortably. This is just a way of saving years of rent while I save up the deposit.

Cheers.

Cornucopia

Unless you know the employer pretty well, why would they agree to it?

I suppose it's a better angle than equity release, though.

Zero_Sum

You'd have to declare to the bank that the deposit has come from your parents, along with your new reduced salary.

cosmicbeard

I know employer well (small company), employer has approached me wanting to help.

Reduced salary would still get me my mortgage easily. I was told by HSBC that non-refundable gift from parent is OK for deposit.

Yorkie1

I can't see any mortgage lender being happy with a deposit on that basis.

Both you and your parent would have to state that the money from them to you was an outright gift and not to be repaid. To make that declaration, knowing it to be untrue, is mortgage fraud.

Once the involvement of the employer is revealed, that would just make it far more complicated. I assume this is an essential part of the plan, and that your parents can't just give you the money outright? What will you do when the lender asks for copies of your parents' bank statements - as they may well - and it shows they have no savings of their own except from a lump of cash from the employer (theirs? yours?).

Why on earth would an employer make a loan to someone and then write it off anyway?

Your plan doesn't make sense on quite a few levels.

Zero_Sum

cosmicbeard wrote: »

I know employer well (small company), employer has approached me wanting to help.

Reduced salary would still get me my mortgage easily. I was told by HSBC that non-refundable gift from parent is OK for deposit.

what happens if you were to get a job elsewhere? or the company went bust & called in the money you owed them?

Thrugelmir

cosmicbeard wrote: »

Employer writes off loan to parent.

Then this would constitute a taxable payment. As would appear to be a contrived arrangement.

cosmicbeard

Technically the money isn't to be repaid to my parent. Parent has other savings. Employer would write of loan because they have effectively been paid back by my pay cut. (very generous/helpful employer)

Tax on the written off loan considerably less than years of rent? Therefore worthwhile?

I must admit it sounds dodgy as hell to me.

cosmicbeard

Zero Sum - this is a big issue. Employer would have to take my word. Not sure what would happen if company went bust.

laurel7172

Effectively, then, your employer is paying some of your salary tax free to a third party (your parents-by not taking loan repayments from them).

I don't know what mortgage companies think of that, but you're heading for major problems with HMRC if they find out.

Thrugelmir

cosmicbeard wrote: »

Technically the money isn't to be repaid to my parent. Parent has other savings. Employer would write of loan because they have effectively been paid back by my pay cut. (very generous/helpful employer)

Lending money to unconnected 3rd parties then writing the debt off. Is in essence tax avoidance.

How much is the potential loan?