Deposit from Parents, but NOT a gift

umfrevillen

Hello,

So my parents are going to be lending me the deposit for an apartment. However, the way we want to set it up is so that they share in 50% of the profit or loss when the property is next sold above a common law wife or spouse. BUT they're moving to America very very soon and don't want to be caught up in any unnecessary tax payments as a result of having their name on the deed.

Not really sure how to proceed.

All help welcome

Thank you!

hazyjo

Do you have anything saved towards the deposit too or is the deposit 100% borrowed? If the latter, it ain't gonna work anyway so forget the rest.

davidmcn

If there's a mortgage lender involved too, are they happy with a borrowed contribution from the parents? They usually prefer it to be a no-strings-attached gift.

Parents' names aren't going to be "on the deeds" in the sense of being owners - but they can (if they want) register a charge to secure their borrowings.

Their tax affairs are for them to figure out rather than you, but I don't see any (UK) tax implications unless they're making a profit out of lending you the money. No idea whether having a loan secured over a UK property might have implications for them in the US.

Silver_Queen

You'll be hard pressed to find a lender who is happy to lend to you with another charge on the property, unless you have a sizeable deposit of your own and your parents' contribution is additional to that.

sammyjammy

No such thing as a common law wife either...

AnotherJoe

I have exactly this kind of set up with my daughter.
She has a loan from me, 50% house cost, doesn't need to be repaid until house is sold, I get 50% of house sale back, we have a legal agreement, there is a second charge on the property to protect the loan. She initially used Santander as the lender then switched to Nationwide. As the house was bought with a mortgage fir 50% LTV the mortgage rate was very good

xylophone

https://www.samconveyancing.co.uk/news/conveyancing/gifted-deposit-or-is-it-a-loan-from-your-parent-291 might be worth a read through.

Why would your parents be named on the deeds? It would be your property?

Isn't the agreement that you would repay the loan (plus interest at an agreed rate/ a percentage of the sale value)?

ThePants999

hazyjo wrote: »

Do you have anything saved towards the deposit too or is the deposit 100% borrowed? If the latter, it ain't gonna work anyway so forget the rest.

That's not necessarily true.

There are two reasons a bank wouldn't want to lend you 100% of the purchase price. One is that they need to be sure they can recoup their money if they repossess. The other is affordability. The latter remains relevant if you borrow less from the bank but make up the difference with further borrowing, but the former isn't necessarily. A bank might be unhappy to lend you £100,000 to buy a £100,000 house, but they might still be happy to lend you £50,000 to buy a £50,000 house when you're also borrowing the other £50,000 as long as (a) your income supports borrowing £100,000 and (b) whoever's lending you the other £50,000 is happy to have an inferior charge so that the bank get their money first.

AnotherJoe

hazyjo wrote: »

Do you have anything saved towards the deposit too or is the deposit 100% borrowed? If the latter, it ain't gonna work anyway so forget the rest.

That's just wrong if if you can find the right lender. See my post #6

Tom99

AnotherJoe wrote: »

I have exactly this kind of set up with my daughter.
She has a loan from me, 50% house cost, doesn't need to be repaid until house is sold, I get 50% of house sale back, we have a legal agreement, there is a second charge on the property to protect the loan. She initially used Santander as the lender then switched to Nationwide. As the house was bought with a mortgage fir 50% LTV the mortgage rate was very good

Out of interest will you pay income tax or CGT when you take the profit?

Comms69

umfrevillen wrote: »

Hello,

So my parents are going to be lending me the deposit for an apartment. However, the way we want to set it up is so that they share in 50% of the profit or loss when the property is next sold above a common law wife or spouse. - no such thing BUT they're moving to America very very soon and don't want to be caught up in any unnecessary tax payments as a result of having their name on the deed.

Not really sure how to proceed.

All help welcome

Thank you!

cautiously, very cautiously