Tax implication on gift to help us with a house deposit..

debzebhinds

Hi All,
We are first time house buyers, and I am considering asking my Dad if I can have/ borrow 20k to contribute towards our house deposit.
What are the ramifications are of this -would we/ dad need to pay inheritence tax on this?
Should Dad seek advice from the solicitor and write this into the will? (I have two older sisters so estate will go to us).
Any advice/ guidance on best way of going about this all would be greatly appreciated as I wan't to be armed with as much knowledge as possible before approaching him...
Many thanks

dzug1

No tax either way at the time of the gift


There would be the potential for inheritance tax should your dad die within 7 years of making the gift. Depends on the total size of his estate


You also need to find out the mortgage company view on the gift/loan

Kynthia

Would it be a gift or a loan as the mortgage company will care greatly? Do you have any deposit of your own? Are you buying alone or with someone? Would your dad want to protect his money from you divorcing in the future? Maybe look at getting a trust deed to say that £20k of the sale proceeds go to your dad first?

debzebhinds

Not sure at this stage if Dad would want it to be a loan, or a gift. I would leave that entirely up to him to decide.

I will be buying with my boyfriend (we have been together for nearly 9 years), and he has 20k saved up. Its looks like most banks want at least 80 - 85% ltv, and we've been looking at houses around 185k. The plan would be to go in equally so if we were to split it would be straight down the middle.. are the rules all different if you are not married?

Thanks for all your help

BillJones

debzebhinds wrote: »

Not sure at this stage if Dad would want it to be a loan, or a gift. I would leave that entirely up to him to decide.

You cannot use a loan as a mortgage deposit; your lender will not lend to you on that basis.

If it's a gift you'll need documentary evidence that this is the case, as the lender will need to ensure that no-one else can claim to have a stake in your house.

Kynthia

What rules do you mean, as generally they are very different for married and non-married people? Marriage is a legal joining and not just a piece of paper. At the moment England has no such thing a 'common law partner'. Therefore you are buying the most expensive asset you'll ever own with a joint debt that lasts longer than most relationships, with someone who is legally no different to a friend. You should not do this without havenjng discussed and understood the risks and what should happen financially and practically if you split.

theartfullodger

When I did same with a son within the past 2 years the mortgage lender required me to sign a document agreeing the the ££££k was an outright gift & not a loan...

Suspect that may be the case with you...

debzebhinds

I see, thanks for that info.

In terms of the marriage, we have discussed the risks and what we would do financially if we did split, but my point is - why is that any different to if you were married? We both plan to put in equal amounts for the deposit, and if we were ever to split, profit (or debt) would be equally divided. We have been together for 9 years, which is longer than some marriages and plan to start a family once we have settled in our first home.

getmore4less

The main difference is death intestate.

You can buy as joint tenants which can avoid owning 1/2 a house belonging to someone you have no connection with and you haveing 100% resposibility for the mortgage

debzebhinds

So if we write a will then it doesn't really matter if we are married or not?

Technically, if we aren't married, does that mean one of us can just run away and have no liability to pay to mortgage? (obviously I would hope this would never happen!!!)

RAS

debzebhinds wrote: »

So if we write a will then it doesn't really matter if we are married or not?

Technically, if we aren't married, does that mean one of us can just run away and have no liability to pay to mortgage? (obviously I would hope this would never happen!!!)

Yes precisely, legally both are jointly and severally liable for the whole debt but threads here and on the families forum show lots of additional problems.

Either of you can burger off and leave the other party.

1. Liable for the whole of the mortgage (that is the meaning of joint and several liability means.
2. Neither party would be able to sell without the other consent.

the scenarios from there are

1. one party with or without children unable to afford mortgage and unable to sell, to move to cheaper premises, or to rent, or closer to family support or to new employment.

2. One party moves new partner in but refuses to pay more than 50% of mortgage; so the non-resident partner is screwed long-term.

3. One party refuses to pay mortgage and wrecks other party's credit rating etc etc.

4. When the house is finally sold one party holds the other to ransom at the last minute and demands say 75% in exchange for their signature instead of 60% as previously agreed.

If you are married, the financial settlement on divorce ensures that the best arrangement is made for all parties; decides when the house is sold, who is liable to pay the mortgage etc. It ensures that the interests of the children are taken into account.

If you are not married you need to sit down, discuss all the possible ways this relationship could fail and decide on a deed of trust. As you are and with children.

Otherwise you are both at risk of being royally screwed if things go wrong.