Selling my house to a relative - Can I gift a deposit?

welch9

Hi Guys,

Just wondering on this, I own a property outright which my cousin would like to buy and can afford to buy but doesn't have a deposit. Can I give him the deposit to effectively give them a deposit to use to buy my house at a fair market value. The money would be given to my cousin prior to the sale going through in the normal way you would have the deposit prior to exchange of contracts. This would be a total gift.

Sale price £100,000

Deposit given to Cousin £5000

Cousins Mortgage £95000

hazyjo

So long as you are happy for it not to be paid back and not to have any interest in the property, I don't see why not. You may have to prove where the money has come from for money laundering purposes.


Do they have money for associated buying/legal costs? It ain't cheap!


I would be a bit concerned about them having what I can only imagine to be around a £25k salary and not having saved anything - but then I guess that's the lender's risk (should they take it). Has he been paying rent or living with family? If the latter, the lender may be wary...


Jx

da_rule

You can do one of two things:

1) Give him the cash as you say; or
2) Gift him the equity in the house (so you basically gift him the money but no actual cash changes hand).

Some lenders get a bit twitchy over family transactions and the fact that you are also the existing owner of the property with an interest in that property may cause some more complications. However, as long as your cousin is upfront with his broker (if he is using one) and you sign the relevant paperwork stating that the money is a gift and you don't have any claim on the property then it could feasibly happen.

welch9

hazyjo wrote: »

So long as you are happy for it not to be paid back and not to have any interest in the property, I don't see why not. You may have to prove where the money has come from for money laundering purposes.


Do they have money for associated buying/legal costs? It ain't cheap!


I would be a bit concerned about them having what I can only imagine to be around a £25k salary and not having saved anything - but then I guess that's the lender's risk (should they take it). Has he been paying rent or living with family? If the latter, the lender may be wary...


Jx

Hi, they have actually been renting it from me for over a year. Solicitors fees will be taken care of by them.

hazyjo

welch9 wrote: »

Hi, they have actually been renting it from me for over a year. Solicitors fees will be taken care of by them.

And mortgage product fee, valuation, and possible survey (they may choose to have one) - some of these may be included in a mortgage product. I'm looking at three at the mo - one's £995, one's nearer £1,500 and the other is free.

Jx

welch9

hazyjo wrote: »

And mortgage product fee, valuation, and possible survey (they may choose to have one) - some of these may be included in a mortgage product. I'm looking at three at the mo - one's £995, one's nearer £1,500 and the other is free.

Jx

All taken care of by them

AnotherJoe

There's even a name for this, 'gifted deposit'. No money changes hands, you agree sale price is £100k, hopefully lender values it at that, you gift the £5k deposit, so you will get £95k paid to you upon sale.

My only concern would be, can your cousin afford this if he hasn't even been able to save £5k?

csgohan4

Can your cousin actually afford to maintain a house, do they know how much it costs to get a new boiler or new stove e.t.c?

Cakeguts

welch9 wrote: »

Hi Guys,

Just wondering on this, I own a property outright which my cousin would like to buy and can afford to buy but doesn't have a deposit. Can I give him the deposit to effectively give them a deposit to use to buy my house at a fair market value. The money would be given to my cousin prior to the sale going through in the normal way you would have the deposit prior to exchange of contracts. This would be a total gift.

Sale price £100,000

Deposit given to Cousin £5000

Cousins Mortgage £95000

You say that the cousin can afford to buy the house. They can't though can they because buying a house means saving for a deposit? The saving for the deposit is the practice needed to save to pay for repairs and if your cousin is unable to save for the deposit then they can't afford to buy a house.

I would suggest that you say to the cousin that you are happy to sell them the house when they have saved the deposit.