Is money from family classed as Other or Gift for house purchase?

Housetohouse

Hi, I have had an offer accepted on a house. 

I will be using a combination of house equity, savings and money from a family member to purchase it outright. 

No mortgage required.
I will be paying family member back, its an informal agreement between us.
For the solicitors forms for money laundering I need to declare where money is derived from.
There is a tick box for Gift or other.

Do I tick "other" and state informal loan between family members, I will have no paperwork, however family member happy to sign anything, show ID etc, or is it classed as a gift?

davidmcn

If it's a loan call it a loan. The solicitors won't really care whether it's a gift or a loan if there's no mortgage lender involved, they just want to know who it's from. They'll need ID/bank statements etc either way.

theartfullodger

When (two separate occasions, two different mortgage lenders) two of my sons were in receipt of sums from me on buying, the lenders required a document signed by me stating the amount was an outright gift.  So I signed, obviously.

What mortgage lender would provide say a 95% mortgage when they knew anyone else was providing another 5% loan?? (or smaller amount).  Mortgage lender would be bonkers to agree.

AnotherJoe

Put it as a gift. Keeps it simple, and with no mortgage co involved, there's no one other than you who could claim to have been disadvantaged by not declaring it so.

pbartlett

if all else fails, fall back on the truth is what i say....

Housetohouse

Ok quite split answers. 

I have ticked gift on the form today but now I can see the "other" box questioned myself was I ticking the right box.

Not trying to deceive anyone, there will be no interest in the house from family member.

Family member can show statements,ID, sign forms,etc so must say I am still unsure.

Thank you for replies so far.

davidmcn

Just explain to your solicitor what's going on. Others here are possibly under the misapprehension that a non-gift is a problem, but that's really only an issue where you have a mortgage lender to worry about, as they don't like other loans being involved.

PRAISETHESUN

AnotherJoe said:

Put it as a gift. Keeps it simple, and with no mortgage co involved, there's no one other than you who could claim to have been disadvantaged by not declaring it so.

Besides the person who "gifted" the money to OP... if they decide they want it back but there is a piece of paper saying they signed saying it is a gift then they are kinda buggered if things deteriorate and they decide to try and pursue it.

I agree that you should probably be truthful to the solicitor and state it is a loan. I'd also document the loan agreement to some extent. Nothing fancy but a statement signed by both parties (ideally in the presence of an independent witness) stating the amount to be lent, the interest to be paid (if any) and the repayment terms would be the bare minimum in my mind.

Housetohouse

Think I will declare it as a loan then.

Family member does not want the money back but I want to repay it.

It is quite a small sum, I could not have obtained a mortgage for the sum of money as it was too small. Family member does not want me to get a bank loan so offered money as a gift but I will be able to repay it in 10 months.

I did think of us getting something in writing but family member not interested in doing so.

AnotherJoe

If you declare it as a loan your solicitor may insist than the "lender" gets a solicitor involved (to protect the solicitor not you or the lender). Needless complexity and cost. Also, the lender wants to give you the money so it's a gift from their POV, if you decide to pay it back later, that's on you but meantime you've made it more complex

getmore4less

Housetohouse said:

Think I will declare it as a loan then.

Family member does not want the money back but I want to repay it.

It is quite a small sum, I could not have obtained a mortgage for the sum of money as it was too small. Family member does not want me to get a bank loan so offered money as a gift but I will be able to repay it in 10 months.

I did think of us getting something in writing but family member not interested in doing so.

That's a gift(at point of transfer)


There are easy ways round small mortgages but often not cost effective if you have other short term options.


I would treat it as a gift as that is what it is.


You deal with your desire to pay them back separately.