Morgage deposit gift question

jat80

Hi,

It's my first post on here as we have a bit of an odd question about morgage deposits.

Basically, myself and my wife are first time buyers. My Father has offered to help us out with a deposit to get on the property ladder but it has hit a snag. Although we have passed all other checks with our morgage application, we have failed it because my Father lives outside the UK and as they cannot perform credit and other checks, they cannot accept the cash from him. He is a British citizen but not resident, and the cash is in a UK savings account but the bank will not lend us the morgage, even after him writing letters and completing a morgage 'gift' form.

To get out of this, we have discussed transferring the cash to my wifes parents, who live in the UK, and them 'gifting' it to us. Is this legal? Are we allowed to do it? We know there could be inheritance tax issues should something aweful happen in the next 7 years but other than that is what we are doing a feasible workaround?

It's very frustrating that a technicality like this could make us miss out on our dream house. We have currently had an offer accepted based on a morgage in principle, but as the bank won't accept our deposit we are worried about the whole thing falling through.

Any advice would be greatfully recieved!

GMS

Which country does your father live in? Which lender have refused to accept it?

Moving the money around is not a good idea as this would be picked up by the lender and/or solicitor and cause issues.

John1993_2

You are probably sailing a bit close to the wind if you do this, as you will be trying to make funds from a non-resident appear to be sourced from a resident. This is exactly what money laundering involves, and so is being looked out for. If your mortgage company asks you for the ultimate source of the funds, or asks the in-laws where they got the money from (and if they don't tell the truth), then you may well have committed mortgage fraud.

Money laundering rules that the bank is following care about the ultimate source of the funds, not whether you've "layered" it through legitimate accounts en route (although the layering itself is part of money laundering, and is something that banks look oout for). If anything this layering only makes things worse, as it can cause legitimate funds to fall under suspicion.

Atcually, I'd go further, and say that what you are considering doing actually IS money laundering if you take this route; it's the very definition of it. You want to take money that the bank has classed as "dirty" (no matter how unfair that definition may feel, as you know that it was legitimately earned and owned), and launder it through additional accounts to make it look "clean".

jat80

Ah, that's what we were worried about. My Father lives in Kenya, he has lived there for 30+ years but does already own property in the UK (an old family home that he rents out). He is a British citizen (born in the UK) who moved to Kenya to work for the british goverment building roads all those years ago.

The cash is in a UK bank account, it is a shared account in the name of my Father and my Sister (she manages the rental property). We have considered getting my sister to sign the form, but that also requires my Father to sign it, but my Sister is wary of tax implications (her husband is self employed and she receives child tax credits).

The bank our morgage lender has gone through is Leeds Bradford.

We're worried the whole thing will fall through as the bank will not accept the deposit. Is there anything we can do?

John1993_2

I don't know of any way to help, so have to hope that somebody else does. Every quarter I have to undertake mandatory trading regarding our money laundering obligations, but this is (of course) focussed 100% on ensuring that we only deal with legitimate funds. The question from the other side is never dealt with.

All that I can suggest is to sppeak to your bank manager again, and find out what would need to happen to allow these legitimate funds to be used. Approach it from that direction "You know that the money is legitimate, I know that it is, what do we have to do to allow your systems to also recognise it?" as opposed to "can we really not use it?"

One point in your first post sticks out a little, and that's that you've suggested that they are credit checking your father. They should not (I presume) need to check his redit, unless you are promising the money from him later. They should do anti money-laundering checks, but that's not the same.

Is it possible that rather than them not accepting his cash, that they thiink that it's "on a promise", i.e. going to turn up later, and so they genuinelly would need a credit check to know that this was true? If so a solution to this would be for him to transfer the money to you now, and for it to be in your account. After this, they don't face his credit any longer.

Gentoo365

I agree with the post above. Unless he is acting as a guarantor they should not really need to credit check him. However they may have decided that they need to confirm the source of the funds.

I am confused about you stating that they are accepting funds from him. Your father can simply send the funds to you. Then you send them to the solicitor, then they are added to the money supplied by the bank and used to purchase the house.

The bank does not therefore need to accept a transaction from Kenya at all. It just needs to know that you have the money from a legitimate source.

It may therefore need confirmation that you received the funds from a relative and that the relative gave them to you as a gift.

The letter I was asked to supply from a relative was as follows:

For the attention of Natwest

I am [my name]'s father

I [parents name], can confirm that I have gifted the figure of [amount] and understand that it will be used towards the purchase of the property:

[property address]

This gift is non-repayable and I will have no interest in the property, either on completion or in the future. I will not be living in the property. I will not be imposing a second charge, and having sought independent legal advice, understand the implications of this.

I have heard some people say that the bank (or solicitor) went further and asked for a description and proof of the source of funds at the other end. e.g. a bank statement from the relative showing the money in a legitimate account. However that should not be hard, unless your father is planning on walking up to the local Western Union with cash. I assume the money is in a legitimate bank account and statements can be provided to prove this.

jat80

Sorry, I was a bit unclear about the checks. They can't process any bankrupcy checks against my father, as well as some other financial checks.

We have the above form, and my Father has already written a letter to the same effect, but on the forum, it clearly states gifts from non residents are not accepted.

Our morgage broker says if he simply puts the funds in my account, as part of the purchasing process they will ask where the funds came from as they haven't been in my account over the past 12 months, which leads to the same problem as my Father gifting the deposit.

I think the suggestion of talking to the bank and trying to explain the situation sounds best, but we are going through a morgage broker and we assume this is what he is doing at the moment. He has said that if my sister and father both sign a gift form it might be acceptable (the cash is in a UK bank account in both their names), but my sister is worried about the tax implications.

maninthestreet

Why is the lender performing bankruptcy checks and 'other financial' checks on your father if he is just gifting you the deposit?

Let_Us_See

Standard practice to ensure "father" is not disposing or hiding assets from possible creditors who have the legal right to claw back, even if the funds have been used as a deposit for property purchase.

nuks

My father gifted me £10K last year when I bought my property - and wrote a letter to say it's a gift and he doesn't want it back/no interest in the property, he then wired the money from his bank account (EU country where he resides - he has no ties to the UK other than my presence here) to my UK bank account and that was considered acceptable by Halifax.