Business loan for home deposit - request for advice

edited 30 November -1 at 1:00AM in Mortgages & Endowments
7 replies 605 views
anyhelpappreciated23anyhelpappreciated23 Forumite
4 Posts
edited 30 November -1 at 1:00AM in Mortgages & Endowments
Hi all,

I would be grateful for any advice regarding the legality of using a loan taken out through a family business to contribute to a deposit for a residential house purchase.

A family member has suggested taking a loan (in the region of £30k) out on their business, gifting it straight to me (without me having to repay them) and combining this with my own funds to put down a deposit on a house.

I am not sure if this is legal or not so I would be grateful for any advice.

Kind regards.

Replies

  • amnblogamnblog Forumite
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    Bit confused here.

    If the business is giving you a loan it is not a gift.

    It is legal if declared, most lenders do not accept loans as part of deposit but it can be done in theory with the right lender.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Hi,

    Thanks for your reply. Sorry I wasn't clear. The suggestion is that the business takes out a loan from a bank, and the business owner then gifts me the value of that loan, which I then use as part of a deposit on a house.
  • amnblogamnblog Forumite
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    Where the donor gets the funds is not an issue (as long as it is legal).

    The donor will need to be a close family member and provide a gift letter.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • edited 29 October 2015 at 5:30PM
    tomtontomtomtontom
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    edited 29 October 2015 at 5:30PM
    How is the business owner planning to account for giving away £30K? Not a problem for you but I can't see how he would put it through the books. Unless he takes it as a directors loan and then gifts you the money personally, and then pays back the money himself? Seems a convoluted way of doing things.
  • Thanks all. I'm told by the business owner that their loan is in fact a personal loan, not linked to the business. It would be based on their earnings as directors.

    I assume this would be fine to be gifted to me for use as a deposit?

    Regards.
  • TrickyDicky101TrickyDicky101 Forumite
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    Do they expect you to repay them?
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