Using parental gift for re-mortgaging

BristolExile

Hi

We are looking to move house and re-mortgage. My parents have agreed to give a 'gift' to help us move up the property ladder. Are there any issues with using this along with equity from current property for deposit?

Cheers

kingstreet

A remortgage is a new mortgage on an existing property where the funds are used to replace the old mortgage, possibly with increased borrowing.

If you are moving house, you are taking out a new mortgage to fund your purchase. A gift towards a deposit in such circumstances is normally acceptable, with a letter confirming it as a gift, non-interest bearing and no interest in the property will be given in exchange.

Yorkie1

The house purchase for the new property is a completely new application so you will need to declare where the equity / deposit is coming from.

Your use of commas round the word 'gift' implies that it is to be a loan but that you and your family intend to lie about this to the lender. If this is so, yes this is an issue as it is mortgage fraud.

If this assumption is incorrect and it is a true gift then I doubt there will be a problem in principle.

By the way, it's not a re-mortgage. That term applies to the situation where you get a new mortgage on the existing property with a new lender. It doesn't apply to a house move situation.

BristolExile

Thanks both, very helpful. It is a gift. I think I only used the speech marks as was not sure if this was always the term used.

I read in another thread that my parents could become liable for paying back the value of the gift in the event of me becoming bankrupt and losing the house. Surely that cannot be true as once the gift has been received by me it is my money?!

kingstreet

No. It's the other way round.

If either of them became insolvent the gift could be reversed as the Official Receiver has the right to recover funds to satisfy creditors.

amnblog

Similarly, in the event of death of the donor after a gifted deposit that gift may be liable to inheritance tax.

Both scenarios unlikely but your solicitors will point them out to you.

If part of your deposit is a gift you need a correctly prepared gift letter to provide to the lender.

PM me and I can email or text you an example.