Loan from Dad...subject to 40% tax implications?

M.S.E.

I'm buying a second property and my Dad is loaning a sum of money so I had a more attractive offer to present to the Vendor. As soon as Contracts are signed and completed I will remortgage and pay Dad back in full. This may take a couple of months. I won't be paying him interest and only my name will appear on the Title Deeds.

Q: Would that money be subject, in any way, to 40% tax implications? Or seen as income/capital gains?

pvt

No and No.

The only tax implication is if your Dad charged you interest on the loan, which he would then have to pay tax on at his nominal rate.

Caz3121

A few things to be aware of with your plan
The lender will ask for the source of the deposit and a, if declared as a loan, you will likely restrict the lenders
You will still be restricted by the LTV to keep the rate you are on so, by remortgaging and increasing the LTV this could increase the interest rate of the mortgage
If this is a BTL that has maximum of 75% LTV you will be unlikely to be able to draw more down until the property increases in value to keep it at the same LTV (or lower)
You may have difficulty finding a lender that will allow you to remortgage within the first 6 months

JethroUK

Caz3121 wrote: »

A few things to be aware of with your plan
The lender will ask for the source of the deposit and a, if declared as a loan, you will likely restrict the lenders
You will still be restricted by the LTV to keep the rate you are on so, by remortgaging and increasing the LTV this could increase the interest rate of the mortgage
If this is a BTL that has maximum of 75% LTV you will be unlikely to be able to draw more down until the property increases in value to keep it at the same LTV (or lower)
You may have difficulty finding a lender that will allow you to remortgage within the first 6 months

Or just don't tell them it's a loan

M.S.E.

Thank you for your replies

I will be putting in around 45% and Dad 55% as a Cash Buyer.
I have spoken to a Financial Adviser and he has checked out a few Lenders and they have said they will need to see 3-6 months of Tenant's income on my current property before they will consider lending on the new one, so this slims down the number of possible Lenders. He said my best option would probably be to borrow on currently property (which is mortgage free) so effectively it is a BTL rather a LTB...this would give me more options.

What do you think my best option or reason to tell the Lenders my request for remortgage/paying Dad back if not explaining if was originally a loan?

Thank you.

Lisa

Thrugelmir

M.S.E. wrote: »

What do you think my best option or reason to tell the Lenders my request for remortgage/paying Dad back if not explaining if was originally a loan?

Therein lies your problem. Lenders may well assume that you weren't truthful. Which will have the result of undermining your application. After all why would they trust you now.

G6JNS

JethroUK wrote: »

Or just don't tell them it's a loan

Very stupid to not tell the truth in the circumstances. It is a criminal offense.