child gifting to parents for deposit!

luberluber

Hi all

Bit of a funny one I know - what is the scope for an adult child gifting funds to their parents for the deposit on a mortgage purchase? Other way round to usual I know!

Are lenders ok with this? I should point out this is for a commercial mortgage to buy a business (rather than a residential purchase or BTL). Also I presume a commercial lender will be very hot on source of deposit funds in the first place and want to know?

Just want to know it's worthwhile doing before I move any funds!

Many Thanks

AnotherJoe

Why would they care if its parents, children or your great auntie gifting?

luberluber

Admittedly I am going on experience only with residential and buy to let mortgages, but I have always been asked exactly where the deposit funds have come from. And I understand gifts parent to child are usually always accepted (with gift letter, indemnity insurance) but other relationships (e.g. siblings, child to parent) may be more frowned upon.

Or are commercial mortgages different?

Ta

Thrugelmir

If they are buying a business then a different scenario to standard mortgage products. I would suggest you seek advice as by gifting the money to them it becomes part of their estate. Which one day you may well inherit.

AnotherJoe

luberluber wrote: »

Admittedly I am going on experience only with residential and buy to let mortgages, but I have always been asked exactly where the deposit funds have come from. And I understand gifts parent to child are usually always accepted (with gift letter, indemnity insurance) but other relationships (e.g. siblings, child to parent) may be more frowned upon.

Or are commercial mortgages different?

Ta

As long as there is a clear declaration that the money is a gift, why would one relative be "more" frowned upon and another less? Any sources for that?
And no indemnity insurance needed either, indeed I dont see how that could possibly work. What would it cover? It would need to cover fraud by the person taking it out !

joujou

AnotherJoe wrote: »

Why would they care if its parents, children or your great auntie gifting?

My bank (HSBC) made it clear that any gifts that contributed to the deposit will need a form signed to indicate that the gifter will not have an interest in the house because of the gift.

davidmcn

AnotherJoe wrote: »

And no indemnity insurance needed either, indeed I dont see how that could possibly work. What would it cover? !

Usually, attempts to claw back the money for the benefit of creditors, should it turn out that the donor was insolvent at the time of the gift.

Thrugelmir

AnotherJoe wrote: »

Why would they care if its parents, children or your great auntie gifting?

Depends if any of the above move into the property and commence residing in it at any time. Legalities should be covered by default.

AnotherJoe

joujou wrote: »

My bank (HSBC) made it clear that any gifts that contributed to the deposit will need a form signed to indicate that the gifter will not have an interest in the house because of the gift.

Indeed but thats not whats under discussion. Did they indicate the form would be different if it was an auntie or a child rather than a parent?

AnotherJoe

davidmcn wrote: »

Usually, attempts to claw back the money for the benefit of creditors, should it turn out that the donor was insolvent at the time of the gift.

First I've heard of that as a requirement by any lender though. Have you seen a single mention of that being required by someone using a gifted deposit posted here?

And if that was going to happen (hiding money from creditors in essence), the person taking out the insurance would be likely to know about it. It would be like taking out fire insurance on your house whilst surrounded by petrol cans and boxes of matches.

Now I suppose great Uncle Frank might decide its a great wheeze to hide his money from creditors in cousin Terry's house, but the possibilities are endless. Maybe cousin Terry would instead gift the money to parent Martha, who then bought a house. Marthas indemnity insurance would not be activated in that circumstance since Terry was not insolvent.

It would almost be as if anyone taking out this type of insurance would know they'd need it and so the insurance company would be writing a blank cheque. Hence it would either be fantastically expensive, or nullified in the same way an arsonists insurance would be, and thus useless.

davidmcn

AnotherJoe wrote: »

First I've heard of that as a requirement by any lender though. Have you seen a single mention of that being required by someone using a gifted deposit posted here?

Yes, it's been discussed on this forum a few times. There's a blog post here arguing that it's unnecessary.

And if that was going to happen (hiding money from creditors in essence), the person taking out the insurance would be likely to know about it.

They wouldn't, because it's the lender's insurance.

Maybe cousin Terry would instead gift the money to parent Martha, who then bought a house. Marthas indemnity insurance would not be activated in that circumstance since Terry was not insolvent.

But Martha's solicitors will/should have checked the ultimate source of Terry's funds.