Loan for a gifted house deposit

GCL1

Wondering if anyone can advise, a family member wants to gift us money for a house desposit. They currently already have the money in their bank, but would want to get a loan to replace some of the money to keep for themselves.

We’re aware they can’t get a loan out to give to us as a deposit, but they’re looking to a loan to replace the money they’re giving us.

Is there any harm in doing this, or could it be still be classed as using it for a desposit, even though they already have the money previous to the loan?

Any help would be appreciated.

bris

Wouldn't make any difference. They lend you the money, your solicitor does the due diligence on this gift, everything is cleared then they take out a loan.


The solicitor or bank isn't going to keep tabs on the family member. The important thing is them signing a statement saying this is a gift and there is no strings attached.

DCFC79

Mixing money and family not really a good idea.

Craig1981

what amount are you talking about? have you looked into all the complications, if any, with inheritance tax on the deposit gifted to you?

boo_star

Craig1981 wrote: »

what amount are you talking about? have you looked into all the complications, if any, with inheritance tax on the deposit gifted to you?

Why would there be IHT on a deposit that comes from a loan?

Gaz83

boo_star wrote: »

Why would there be IHT on a deposit that comes from a loan?

The deposit isn't coming from a loan.

foxy-stoat

GCL1 wrote: »

Wondering if anyone can advise, a family member wants to gift us money for a house desposit. They currently already have the money in their bank, but would want to get a loan to replace some of the money to keep for themselves.

We’re aware they can’t get a loan out to give to us as a deposit, but they’re looking to a loan to replace the money they’re giving us.

Is there any harm in doing this, or could it be still be classed as using it for a desposit, even though they already have the money previous to the loan?

Any help would be appreciated.

Makes no sense - they can take out a loan if they like and gift you the money or gift you the money from their account.

The purpose of their loan should be whatever they intend on spending the new money on.

PRAISETHESUN

boo_star wrote: »

Why would there be IHT on a deposit that comes from a loan?

The deposit amount is a gift, and there are IHT implications for gifts if the gifter dies within 7 years of making the gift. See: https://www.gov.uk/inheritance-tax/gifts

@OP

As long as you can satisfy money laundering checks about the source of the deposit, I can't see anything wrong with this in principle - as mentioned you would probably need to document it so that their are no strings, etc so it is not viewed as an informal "loan" of some description. The personal loan that your family member takes out would be entirely their responsibility/problem, although I'd keep in mind how it might affect things if they suddenly had financial issues. You might be guilt-tripped into helping since they "gifted" you a large deposit - money can do strange things to families and I echo the comments made by other posters

DCFC79

boo_star wrote: »

Why would there be IHT on a deposit that comes from a loan?

When reading the title I thought the same too.



The family member wants to gift money to the OP from savings they have and get a loan to top up the savings.


Its a strange way of doing it.

System

but they’re looking to a loan to replace the money they’re giving us.

No just no. Completely leaving aside any risk of the loan being seen as being used for the deposit which may or may not happen.....

The interest rate on the loan will be higher than the interest rate on the savings meaning that it is costing them money to replace the money in their savings making them overall worse off.

A much better path is to not replace the money in the savings with a loan but instead replace the money in the savings over the same period the loan repayments would be and at the same amount per month that the loan repayments would be. That way instead of paying out interest they gain interest leaving them better off than doing it via a loan.