Parents gifting money, second charge and tax implications

user1977

Oxid8uk said:

DwightSchrute said:

Just been through an almost identical thing with our new house with regards to loan vs gift and charges, and the political sibling thing. Hope this helps OP a bit.

Parental money, they loaned us (husband and I) the money to buy the house. Non-interest bearing loan so no tax to pay on repayments, we make monthly payments to repay the loan which goes back into their pot/inheritance pot. They have a charge over the property but we are the legal owners so can do what we like with the house. In the event that we sell up, we repay the original loan amount, less any money repaid. If we wanted to get a mortgage on the house, we would need them to change the charge so the mortgage company would be first in the queue, but it is still fine for them to have a charge over the property, not just first dibs. I think this is where it would be a limited title guarantee whereas at the moment it is full title guarantee.

• Parents have the charge they want and control so we can't be reckless and fritter money away.
• Siblings can't get cross because it's a loan, not a gift so they aren't going without
• We get ownership of a lovely house and reap the benefits of value going up

If they wish, they can remove the charge and convert the loan to a gift, the 7 year clock would then start ticking.

the money my parents give would be a gift/loan (whatever you want to call it at the moment) 

It's a loan. It's going to much less confusing for everyone if you don't call it a gift.

getmore4less

Oxid8uk said:

DwightSchrute said:

Just been through an almost identical thing with our new house with regards to loan vs gift and charges, and the political sibling thing. Hope this helps OP a bit.

Parental money, they loaned us (husband and I) the money to buy the house. Non-interest bearing loan so no tax to pay on repayments, we make monthly payments to repay the loan which goes back into their pot/inheritance pot. They have a charge over the property but we are the legal owners so can do what we like with the house. In the event that we sell up, we repay the original loan amount, less any money repaid. If we wanted to get a mortgage on the house, we would need them to change the charge so the mortgage company would be first in the queue, but it is still fine for them to have a charge over the property, not just first dibs. I think this is where it would be a limited title guarantee whereas at the moment it is full title guarantee.

• Parents have the charge they want and control so we can't be reckless and fritter money away.
• Siblings can't get cross because it's a loan, not a gift so they aren't going without
• We get ownership of a lovely house and reap the benefits of value going up

If they wish, they can remove the charge and convert the loan to a gift, the 7 year clock would then start ticking.

Thank you so much for this informative post (rather than some people insinuating we are lying about what this money is - this is what I am trying to clarify at the moment and now see that it is most likely going to be classed as a loan). It is good to know that this can be done. I have spoken with our lenders mortgage advisor who set-up the mortgage initially and she has said that they do allow second charges, and she is also fully aware that the money my parents give would be a gift/loan (whatever you want to call it at the moment) that does not require repayment whilst they continue to be the lender.

I think you may have missed.....

DwightSchrute got 100% loan from parent no mortgage.

bris

Mortgage provider would never allow a second charge on a property to secure a gift as they are not stupid and know a second charge would be securing a loan. I doubt very much you have an offer under those circumstances deposit loans are not allowed.

Not sure whether your just looking for suggestions regarding how to get round this loan from your parents but your story about securing a mortgage with it just doesn't make sense to me.

Keep_pedalling

Oxid8uk said:

DwightSchrute said:

Just been through an almost identical thing with our new house with regards to loan vs gift and charges, and the political sibling thing. Hope this helps OP a bit.

Parental money, they loaned us (husband and I) the money to buy the house. Non-interest bearing loan so no tax to pay on repayments, we make monthly payments to repay the loan which goes back into their pot/inheritance pot. They have a charge over the property but we are the legal owners so can do what we like with the house. In the event that we sell up, we repay the original loan amount, less any money repaid. If we wanted to get a mortgage on the house, we would need them to change the charge so the mortgage company would be first in the queue, but it is still fine for them to have a charge over the property, not just first dibs. I think this is where it would be a limited title guarantee whereas at the moment it is full title guarantee.

• Parents have the charge they want and control so we can't be reckless and fritter money away.
• Siblings can't get cross because it's a loan, not a gift so they aren't going without
• We get ownership of a lovely house and reap the benefits of value going up

If they wish, they can remove the charge and convert the loan to a gift, the 7 year clock would then start ticking.

Thank you so much for this informative post (rather than some people insinuating we are lying about what this money is - this is what I am trying to clarify at the moment and now see that it is most likely going to be classed as a loan). It is good to know that this can be done. I have spoken with our lenders mortgage advisor who set-up the mortgage initially and she has said that they do allow second charges, and she is also fully aware that the money my parents give would be a gift/loan (whatever you want to call it at the moment) that does not require repayment whilst they continue to be the lender.

No such thing as a gift/loan. When we gifted deposits for our children we certainly had to make a declaration the the money was a gift and that we had no financial interest in the property so I an surprised your lender is happy to have a second charge on your home.

kingstreet

bris said:

Mortgage provider would never allow a second charge on a property to secure a gift as they are not stupid and know a second charge would be securing a loan. I doubt very much you have an offer under those circumstances deposit loans are not allowed.

Not sure whether your just looking for suggestions regarding how to get round this loan from your parents but your story about securing a mortgage with it just doesn't make sense to me.

This is not the case. There are at least two lenders who accept this.

user1977

kingstreet said:

bris said:

Mortgage provider would never allow a second charge on a property to secure a gift as they are not stupid and know a second charge would be securing a loan. I doubt very much you have an offer under those circumstances deposit loans are not allowed.

Not sure whether your just looking for suggestions regarding how to get round this loan from your parents but your story about securing a mortgage with it just doesn't make sense to me.

This is not the case. There are at least two lenders who accept this.

They might accept a second charge to secure a loan - why would a gift need a security?

kingstreet

user1977 said:

kingstreet said:

bris said:

Mortgage provider would never allow a second charge on a property to secure a gift as they are not stupid and know a second charge would be securing a loan. I doubt very much you have an offer under those circumstances deposit loans are not allowed.

Not sure whether your just looking for suggestions regarding how to get round this loan from your parents but your story about securing a mortgage with it just doesn't make sense to me.

This is not the case. There are at least two lenders who accept this.

They might accept a second charge to secure a loan - why would a gift need a security?

Dunno. But this is what one lender's criteria states;-

"There must be no conditions attached to the gift, except where the gift is provided by a family member and is subject to a second charge or family trust arrangement. The only condition is for the repayment of the charge upon sale of the property."

user1977

kingstreet said:

user1977 said:

kingstreet said:

bris said:

Mortgage provider would never allow a second charge on a property to secure a gift as they are not stupid and know a second charge would be securing a loan. I doubt very much you have an offer under those circumstances deposit loans are not allowed.

Not sure whether your just looking for suggestions regarding how to get round this loan from your parents but your story about securing a mortgage with it just doesn't make sense to me.

This is not the case. There are at least two lenders who accept this.

They might accept a second charge to secure a loan - why would a gift need a security?

Dunno. But this is what one lender's criteria states;-

"There must be no conditions attached to the gift, except where the gift is provided by a family member and is subject to a second charge or family trust arrangement. The only condition is for the repayment of the charge upon sale of the property."

A gift which has to be repaid is a funny sort of gift - sounds like that lender using a different definition from everybody else.

Oxid8uk

kingstreet said:

user1977 said:

kingstreet said:

bris said:

Mortgage provider would never allow a second charge on a property to secure a gift as they are not stupid and know a second charge would be securing a loan. I doubt very much you have an offer under those circumstances deposit loans are not allowed.

Not sure whether your just looking for suggestions regarding how to get round this loan from your parents but your story about securing a mortgage with it just doesn't make sense to me.

This is not the case. There are at least two lenders who accept this.

They might accept a second charge to secure a loan - why would a gift need a security?

Dunno. But this is what one lender's criteria states;-

"There must be no conditions attached to the gift, except where the gift is provided by a family member and is subject to a second charge or family trust arrangement. The only condition is for the repayment of the charge upon sale of the property."

Thank you so much @kingstreet for confirming that it can be done!

Despite what other posters on here seem to think, neither I or my lender have lied to each other or misunderstood anything about this situation.