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    • jmlng
    • By jmlng 9th Mar 18, 7:39 PM
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    jmlng
    Mortgage Deposit Loan/Tax implications
    • #1
    • 9th Mar 18, 7:39 PM
    Mortgage Deposit Loan/Tax implications 9th Mar 18 at 7:39 PM
    Can someone please assist.

    My friend has agreed to loan me the money to put down as a deposit to buy my first home. She does not require the loan to be repaid until the house is sold (we have a 5 year plan) and would expect a return on her loan (for example 10% of the market value of the property) and has suggested if she dies before it is repaid, then it does not need to be repaid. She does not want a beneficial interest in my property but would want to ensure that she has a return. We have a situation that we would do an informal agreement but are not foolish to do so as we wish to ensure we are both protected should we fall out with each other)

    How would this type of arrangement be viewed by Lenders? I donít want it to affect the affordability assessment.
    Are there any Tax implications CGT IHT etc for either of us?
    Do we need to notify HMRC?
    How would we draw up such an agreement with appropriate terminology?
    Any other issues I need to consider if not addressed above?

    Grateful for any advice.
Page 1
    • 00ec25
    • By 00ec25 9th Mar 18, 10:02 PM
    • 6,373 Posts
    • 5,886 Thanks
    00ec25
    • #2
    • 9th Mar 18, 10:02 PM
    • #2
    • 9th Mar 18, 10:02 PM
    yes it will affect your affordability, why won't it? You are taking a loan that has to be repaid on top of anything you borrow on a mortgage from a lender. If this private loan is the sole source of your deposit them you are in really asking the mortgage company to give you a 100% mortgage, something they really will be upset about if they find out.

    friend expects to get back more than they loaned you. They may not have a share of the legal ownership but depending how the loan is worded they very easily could have a beneficial share of the ownership, in which case they would face a CGT bill for the gain on their "10%" or whatever you agree they will get

    if written a different way, so that friend is not a beneficial owner, but merely gets back the loan + an agreed interest figure, then friend would be liable to income tax on said interest figure.

    the amount outstanding on the loan would form part of friend's estate if they died. You have already suggested a way around that by putting in writing that any o/s loan is written off on death.

    you need to see a solicitor, not try and DIY legal agreements on the cheap
    • davidmcn
    • By davidmcn 9th Mar 18, 10:06 PM
    • 7,634 Posts
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    davidmcn
    • #3
    • 9th Mar 18, 10:06 PM
    • #3
    • 9th Mar 18, 10:06 PM
    How would this type of arrangement be viewed by Lenders?
    Originally posted by jmlng
    Poorly. They don't like you borrowing for your deposit. They might accept gifts (generally only from close family members), but not investments by your pals. So not much point worrying about the other implications until you know whether it even works from the lender's point of view.
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