Family loans

ferdjunior

Hi ,
I’m thinking to buy a property and I’ll have to borrow money from my family . My family lives abroad. This is not a gift and I’ll have to pay them back with interest. I would like to know if I’ll have to pay capital gains or other tax in the Uk, if I need to comunicate this to my bank etc or if I can simply transfer the money in my UK bank account. Many thanks 

DrEskimo

A good rule of thumb is never borrow money from your family. It rarely ends well.

Secondly, most mortgage lenders won't accept the deposit from borrowed money. They will ask if it's a gift or a loan, and may refuse if it's a loan.

normanna

I agree 100% with above.  Have also had experience with a family member lending to another family member and relationships were strained.

MallyGirl

Is this deposit or the full amount you are borrowing?

Others have already covered the 'never borrow money from friends or family as it can end in tears' aspect. I can only agree - we see stories on here all the time about it going wrong, causing family rifts etc.

There is no tax for a borrower to pay on a loan and you only get hit with capital gains, when you sell, if it is not your primary residence. The family charging interest should be declaring that to the tax authorities in their country but that is not your problem.

MinuteNoodles

DrEskimo said:

A good rule of thumb is never borrow money from your family. It rarely ends well.

Secondly, most mortgage lenders won't accept the deposit from borrowed money. They will ask if it's a gift or a loan, and may refuse if it's a loan.

And if you tell them it's a gift the majority of lenders will want a letter from the person who is "gifting" you the money to state it is a gift free of any ties and they will have no interest in the property.

enthusiasticsaver

You should not use borrowed money for a house deposit.  Lenders will not accept it purely because the amount you borrow is subject to affordability criteria and if you have a family loan on top this reduces the amount you are able to borrow.