Nationwide blocking gifted deposits?

k12479

Chilli6 said:

Mickey666 said:

Obviously lenders can impose whatever conditions they want, but what is the actual point of requiring borrowers NOT to rely on a gifted deposit?  I can’t see there is any risk to the lender, so presumably am missing something here.
So what if the deposit is a gift?

I feel the same. If someone meets the criteria with regards to salary and credit history then surely the risk is low?

Increased risk of parents who've 'gifted' money requiring it back due to their own worsening financial situation, thus increasing the risk of the borrower having to repay parents as well as keep up mortgage repayments?

Vestraun

My other guess is nationwide really don’t want to offer 90% mortgages so they’ve set the criteria so high they are basically unviable but they can still say they are trying.

Mickey666

Incidentally, I believe parents can gift their children up to £3k each year with no tax implications but what about the benefit-in-kind of living rent-free (and maybe completely free of ALL living costs)?  This effectively amounts to a 'gift' and would more than likely exceed the £3k allowance.  Does the taxman ever investigate such things or is there an exemption for family members living in the same home?

davidmcn

Mickey666 said:

Besides, don’t lenders manage their risk by controlling the LTV?  So even if their borrower defaults, they are still not going to lose anything are they?

No, lenders don't just rely on being able to repossess the property. Repossession is a time-consuming, expensive and risky process, it's very much a last resort. They'd much rather not have arrears to deal with in the first place, which is why the application process involves taking other measures to assess risk.

Mickey666

Repossesion might be time-consuming but is it really expensive?  Are the lender's expenses not also recovered?

davidmcn

Mickey666 said:

Incidentally, I believe parents can gift their children up to £3k each year with no tax implications but what about the benefit-in-kind of living rent-free (and maybe completely free of ALL living costs)?  This effectively amounts to a 'gift' and would more than likely exceed the £3k allowance.  Does the taxman ever investigate such things or is there an exemption for family members living in the same home?

Payments towards living costs don't qualify as lifetime gifts and neither do "normal gifts out of income", it's really just chunkier one-off payments which are going to be counted.

Besides, I think most parents hope that their offspring will be leaving home long before inheritance tax planning becomes that important!

[Deleted User]

Mickey666 said:

Repossesion might be time-consuming but is it really expensive?  Are the lender's expenses not also recovered?

If the lender is lending at 50% ltv then there is a good chance their expenses would be covered. 

If they lend with a 10% deposit and within the next year the economy takes a hit, the client loses their job and the housing market crashes then there is a good chance the lender will lose money if they went down repo route.  

davidmcn

Mickey666 said:

Repossesion might be time-consuming but is it really expensive?  Are the lender's expenses not also recovered?

They're only going to be recovered if there is sufficient equity in the property, and (in my experience) the vast majority of repossessions end up with a shortfall due by the borrowers - obviously those will often end up having to be written off. And if there were sufficient equity in the first place, you'd expect the borrowers to have managed to sell the property themselves.

Mickey666

davidmcn said:

And if there were sufficient equity in the first place, you'd expect the borrowers to have managed to sell the property themselves.

Would the defaulting borrowers have that option though?  How long would the lender give them?

Say the mortgage was £80k and the house was worth £100k, but the market was slow and it might take some time to find a buyer at £100k.  How long would the lenders allow before their patience wore thin, they repossessed the house and marketed it for £85k for a quick sale?  After all, will they really care if the borrowers lose their equity as long as they recover their loan?

Mickey666

davidmcn said:

Mickey666 said:

Incidentally, I believe parents can gift their children up to £3k each year with no tax implications but what about the benefit-in-kind of living rent-free (and maybe completely free of ALL living costs)?  This effectively amounts to a 'gift' and would more than likely exceed the £3k allowance.  Does the taxman ever investigate such things or is there an exemption for family members living in the same home?

Payments towards living costs don't qualify as lifetime gifts and neither do "normal gifts out of income", it's really just chunkier one-off payments which are going to be counted.

Besides, I think most parents hope that their offspring will be leaving home long before inheritance tax planning becomes that important!

OK, so no tax implications then.

So if the parents had a big enough house and could afford to support their child(ren) indefinitely, then there's absolutely no tax implications for the child(ren) to effectively live off their parents income all their lives?