Business loan for home deposit - request for advice 29 October 2015 at 5:04PM edited 30 November -1 at 1:00AM in Mortgages & Endowments 7 replies 605 views

anyhelpappreciated23

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.

amnblog

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.

anyhelpappreciated23

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.

amnblog

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.

tomtontom

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.

anyhelpappreciated23

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.

TrickyDicky101

Do they expect you to repay them?

anyhelpappreciated23

No they do not.