Mum lending 10k for deposit - is this taxable?

d0nkeyk0ng

As above, signed letter to say it is gift and for how much. Our mortgage lender had a specific form that needed signing.

If it's a loan rather than a gift, then I suspect lenders will see no difference between that and a bank loan - either will mean you can't save enough and a bank would take action to get its money back if you defaulted. Which means mortgage lender might not get the whole house if you defaulted on mortgage.

kingstreet

Some lenders will have a real problem with this when it gets to the underwriter's desk to be signed off.

There are one or two lenders who will accept a parental loan under carefully constructed circumstances.

Most will simply decline the case, but that may be later in the process when fees have been spent.

This would have best been handled by an experienced mortgage broker.

catshark88

You are being lent or given £10,000 to make, I suspect, the biggest purchase of your life so far and writing a letter is too much hassle? Just how lazy are you???

agrinnall

It would be 'easier' for you to say that you found the money down the back of the sofa, but it would be just as much a lie as saying it's a gift when it is in fact a loan. Either convince your mum to actually give you the money, do what kingstreet says in post #13, or save up yourself until you have enough for a deposit.

martin1959

The issue has nothing to do with whether the mother has any right to live in the property. Lending someone money does not give them any right of part ownership. She would have to been named on the deeds, and the lender will not allow anyone to be on the deeds, who is not named on the mortgage.


I have advised many parents who are lending or giving deposits, or part deposits to children to have a subsequent (second) charge put on the property. The reason for this is simple.


Mummy gives Suzy £20k deposit on the purchase of £100k . Suzy and Johnny buy the property. They both share the bills and service the mortgage mortgage for 4 years and then split up. The property worth £120k is sold and £76k mortgage repaid. Suzy and Johnny each get £22k...


Mummy registers a charge for the deposit. Property sold for £120k. Mortgage repaid £76k Mummy repaid £20k Suzy and Johnny each get £12k.


Mummy then lends the £20k to Suzy so she has £32k to put down, and thieving little Johnny does not get any of Mummy's money.


The only reason the BS is asking for a letter, is to confirm that it is a gift, and there are no repayments to be made on the loan, otherwise it will reduce the amount that can be lent.

booksurr

a gift is not taxable

But the issue from the perspective of the lender is very simple....

a gift is not repayable, therefore they require a letter signed by mother confirming it is a gift which you will not repay to her

a loan from mother is repayable, therefore the lender will adjust its affordability calculation on how much you can borrow based on the fact that you owe someone else £10k and have to repay it at whatever rate is set in the terms of the loan. You and you mother may have a gentlemen's agreement that it gets repaid "when you can" but the lender sees it only as £10k that you owe to someone else and so £10k less that you can borrow

of course both you and your mother can lie on the letter she signs and you will probably get away with it , but that is down to your own morality ....

BeansOnToast_2

comeandgo wrote: »

Gifts are not taxable

They might be. If she dies within 7 years of giving this money then it'll be added to her estate for inheritance tax purposes.

Yorkie1

AubreyMac wrote: »

Thank you.

I've been advised that I should mention this as a 'gift' instead of saying my mum is 'lending' it to me as lending implies I'm in more debt.

Would there be any truth in this?

Hence why I ask if it's a gift, is it taxable?

If it is really a loan, then it is mortgage fraud for you both to tell the lender that it is an outright gift.

TheCyclingProgrammer

BeansOnToast wrote: »

They might be. If she dies within 7 years of giving this money then it'll be added to her estate for inheritance tax purposes.

Still not taxable on the recipient of the gift. The liability is with the estate.

AubreyMac

Thank you for replies.

My mum has agreed for it to be a gift and signed a letter that we both drafted this evening.

She even thought it was long winded too & said that she could just transferred the money to me as it is not the lender who would see the cash deposit.

Would mum's £10k mean the building society will lend me £10k less? Because if that's the case i can't afford the flat at agreed price and I might be better off terminating the application with this building society (no credit check has been done yet) & start afresh somewhere else & just increase my deposit by 10k.