Borrowing deposit money from family and friends for Mortgage

preshoabi

Hi

We are planning to buy a house and want to make a deposit. Family members (brother and cousin) and friends have agreed to help us and lend money interest free. Will that lead to any complications or taxes or fees etc etc.

Do we need to tell the Mortgage lender that they are lending money ?

We can repay them when ever we have the money. May be in 5 years.

Can anyone advise?

Regards

PSA

maninthestreet

You will be required to reveal the source of your deposit. Either you tell the truth i.e interest-free loan(s) from family member(s), or you tell a lie - it's your choice....

holly_hobby

If the deposit is a loan and not a gift (ie it is repayable)it will be disallowed as it is essentially a gift with reservation and gives the Donor beneficial rights to the property - which can prevent the lender securing a future possession order and why they won't accept this source of monies.

You either save, or lie on your application (or to the Solicitor) - as one or the other will ask for source and proof deposit - which obviously will result in a fraudulent mge applciation.

Sorry this wasn't more positive for you.

Hope this helps

Holly

preshoabi

Thank you for your replies.

I cant hide the fact that i borrowed the money as it is displayed in our bank statements. But will it incur any fees or taxes if we said it was a gift from family and friends.

Thrugelmir

No fees or taxes.

The issue for the lender may well be the relationship of the donors to you depending on the amount involved.

holly_hobby

No tax on receipt of a gift, but there may be IHT (PET) issues in relation to the Donor's estate - so there may be tax issues.

The gifted deposit should be from immediate family - and MUST be an unconditional gift - to which generally both the Donor and you will generally be reqd to sign a legal disclaimer confirming its non-conditional stauts.

As to suggest (and have a lender accept), that a friend has gifted the monies for no return or consideration would be difficult (and in this case also untrue).

Hope this helps

Holly

preshoabi

The money we are getting are from abroad (USA). Will that cause any issues.

holly_hobby

The Donor may have USA federal gift tax issues on making the donation. - that will be for them to report via their annual IRS return.

Money laudering regs (your solicitor deals with this aspect)

However, its all irrelevant if the monies recd are neither from direct family or an unconditional gift ....

Hope this helps

Holly

preshoabi

My husbands brother is own, so that is direct family. I will be getting frunds from my 1st cousin. Dont know if that will make any difference. They said they will deal from their side in relation to USA rules. Its after the money comes to UK and then when we use it.

holly_hobby

Brother - should be ok depending on lenders view and ML check

1st cousin resident in the US - very tenious link - but will depend on the lender and how they view it.

However it coming from the US, no particular country issues, but of course shall also be subject to ML checks.

Have Bro and Cousin, now decided their contribution is not a loan but a complete unconditional gift i.e made without any requirement of return or consideration ?

If not, regardless of who is providing the capital, its not a gift, and won't be accepted by the lender.

Hope this helps

Holly

somethingcorporate

Unless of course they intend to commit mortgage fraud.