Family gift paid in cash - how to evidence this to conveyancer?

TheJackah

So, we're in a situation that doesn't appear like a normal 'gift deposit' situation.

Our mortgage is £95k minus a £4750 deposit = £90,250. We're paying the deposit out of our savings, no problem.
On top, we're paying an additional £5k to make the difference between mortgage valuation and property purchase price, £5k. £3k of this has been paid by a family member, in cash, out of funds they held in cash, and paid into our account. So there's not technically anyway we can think of evidencing this. At the same time, it isn't a gift 'deposit', as it is not for the deposit, it is to make up the remainder of the purchase price, it has nothing to do with the mortgage.

What are our options in this scenario? Do we declare it as a gift or as our savings? And if as a gift, how would we evidence it?

Slithery

It doesn't matter what you declare it as, it will need to be evidenced either way.
There are no hard and fast rules for providing evidence, it's up to each individual solicitor what proof they require.

user1977

You can't evidence it if it's cash. You'll need to explain to your solicitor (or whoever else needs to verify it) and see what they think.

And if it's going towards the price then it is a gifted deposit, not sure what you mean by "nothing to do with the mortgage".

TheJackah

user1977 said:

You can't evidence it if it's cash. You'll need to explain to your solicitor (or whoever else needs to verify it) and see what they think.

And if it's going towards the price then it is a gifted deposit, not sure what you mean by "nothing to do with the mortgage".

I mean as in, the £5k is not for the lender or mortgage. This is in addition to the requirements for our mortgage. Mortgage valuation was £95k with 5% deposit, which we’re paying out of savings. The £5k is in addition to that. 

AdrianC

TheJackah said:

So, we're in a situation that doesn't appear like a normal 'gift deposit' situation.

Our mortgage is £95k minus a £4750 deposit = £90,250. We're paying the deposit out of our savings, no problem.
On top, we're paying an additional £5k to make the difference between mortgage valuation and property purchase price, £5k. £3k of this has been paid by a family member, in cash, out of funds they held in cash, and paid into our account. So there's not technically anyway we can think of evidencing this. At the same time, it isn't a gift 'deposit', as it is not for the deposit, it is to make up the remainder of the purchase price, it has nothing to do with the mortgage.

What are our options in this scenario? Do we declare it as a gift or as our savings? And if as a gift, how would we evidence it?

It's not your savings... It's a gift. Somebody else has given it you from their savings...

"Deposit" has two meanings in house buying - the exchange security, and the equity you aren't borrowing. This is the latter.

Now, put yourself in your solicitor's shoes... with a legal requirement to ensure that all funds are legitimate, and there is no money-laundering going on.
Several thousand pounds have no apparent source bar "paid in as cash".
But where from? The client is being coy.
It's a gift from a relative. No, they don't want to go through money-laundering themselves.

But, honest, Uncle Luigi from Palermo assures them it's perfectly legit...

No, nor me.

TheJackah

Slithery said:

It doesn't matter what you declare it as, it will need to be evidenced either way.
There are no hard and fast rules for providing evidence, it's up to each individual solicitor what proof they require.

Okay thanks. We will discuss with the solicitor and see what they say. 

george4064

A proper signed letter will be fine, there should be plenty of templates widely available online.

user1977

george4064 said:

A proper signed letter will be fine, there should be plenty of templates widely available online.

Do you mean about declaring it to be a gift, or evidencing the source of the cash? The latter is unlikely to be adequately covered by a letter.

user1977

TheJackah said:

user1977 said:

You can't evidence it if it's cash. You'll need to explain to your solicitor (or whoever else needs to verify it) and see what they think.

And if it's going towards the price then it is a gifted deposit, not sure what you mean by "nothing to do with the mortgage".

I mean as in, the £5k is not for the lender or mortgage. This is in addition to the requirements for our mortgage. Mortgage valuation was £95k with 5% deposit, which we’re paying out of savings. The £5k is in addition to that. 

Your money doesn't go to the lender, it's paid to the seller of the property (via the solicitors) along with whatever you've borrowed from the lender.

george4064

user1977 said:

george4064 said:

A proper signed letter will be fine, there should be plenty of templates widely available online.

Do you mean about declaring it to be a gift, or evidencing the source of the cash? The latter is unlikely to be adequately covered by a letter.

To prove it’s a gift, for proof of source of funds check with solicitor you’re dealing with no what their requirements are. Usually an account statement confirming the balance with the account holders name/address will suffice.

Thrugelmir

The old trick is for a related party to obtain a loan , withdraw the cash and hand it over. The borrower in the background has an unofficial arrangement to repay the loan. That they wish to keep concealed.