Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Pityakka124
    • By Pityakka124 13th Oct 18, 9:39 AM
    • 18Posts
    • 3Thanks
    Pityakka124
    Gifted equity deposit - SDLT 1 form
    • #1
    • 13th Oct 18, 9:39 AM
    Gifted equity deposit - SDLT 1 form 13th Oct 18 at 9:39 AM
    We are buying my grandparents house with the deposit being in the form of gifted equity.

    Should the sale be declared on a SDLT 1 form as the ‘sale value’ with the gifted equity on top or should it be declared as the ‘sale value’ minus the gifted equity?

    If it makes any difference, the figures are;
    House valued at 118k
    Gifted equity deposit 15k

    Thanks!
Page 1
    • davidmcn
    • By davidmcn 13th Oct 18, 9:44 AM
    • 9,315 Posts
    • 9,944 Thanks
    davidmcn
    • #2
    • 13th Oct 18, 9:44 AM
    • #2
    • 13th Oct 18, 9:44 AM
    It's the net consideration, so you deduct the "gift".
    • Pityakka124
    • By Pityakka124 13th Oct 18, 9:53 AM
    • 18 Posts
    • 3 Thanks
    Pityakka124
    • #3
    • 13th Oct 18, 9:53 AM
    • #3
    • 13th Oct 18, 9:53 AM
    Thanks.

    I’m a little confused then, as our lender has said they can only lend against the registered value. On their website they specifically state they deal in gifted equity.

    If that’s the case, I’d still need to find the difference between actual value and sale value?

    I.e our offer is 87.5% LTV. If it’s registered as 103k, they can only borrow us 87.5% of that, then where does the shortfall come from?!
    • amnblog
    • By amnblog 13th Oct 18, 10:07 AM
    • 10,840 Posts
    • 4,319 Thanks
    amnblog
    • #4
    • 13th Oct 18, 10:07 AM
    • #4
    • 13th Oct 18, 10:07 AM
    Why is your Solictor not handling this.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Pityakka124
    • By Pityakka124 13th Oct 18, 10:16 AM
    • 18 Posts
    • 3 Thanks
    Pityakka124
    • #5
    • 13th Oct 18, 10:16 AM
    • #5
    • 13th Oct 18, 10:16 AM
    They are, there just seems to be confusion between the lender, our broker and our solicitor. I was just wanting some advice independent of those involved If it’s the net consideration, then I think there may be some confusion at the lender, perhaps? It was described as gifted equity deposit from the beginning, therefore their statement saying they can only lend against the registered value is potentially not right? They are borrowing against the value of 118k which is stipulated in black and white on our formal offer. The difference between our loan and the value is gifted equity. I can’t fathom why there seems to be any confusion, it seems fairly straight forward? Maybe I’m being naïve thinking that? As I say, on their website it specifically states they allow gifted equity deposits.
    • davidmcn
    • By davidmcn 13th Oct 18, 12:33 PM
    • 9,315 Posts
    • 9,944 Thanks
    davidmcn
    • #6
    • 13th Oct 18, 12:33 PM
    • #6
    • 13th Oct 18, 12:33 PM
    What does your lender think they mean by "registered value"? It's probably not the same as the net consideration for SDLT purposes.
    • Pityakka124
    • By Pityakka124 13th Oct 18, 3:52 PM
    • 18 Posts
    • 3 Thanks
    Pityakka124
    • #7
    • 13th Oct 18, 3:52 PM
    • #7
    • 13th Oct 18, 3:52 PM
    From what I have read in emails between all parties, the lender is considering the ‘registered sale value’ as being the same as the the value of the net consideration on the SDLT form. When in my eyes the reality is the house is being sold at a value of 118k, 15k is being gifted as equity and the net consideration is 103k. Hopefully on Monday things can be cleared up
    • Blueoctopus
    • By Blueoctopus 13th Oct 18, 3:55 PM
    • 19 Posts
    • 5 Thanks
    Blueoctopus
    • #8
    • 13th Oct 18, 3:55 PM
    • #8
    • 13th Oct 18, 3:55 PM
    Hi,
    We bought our house with gifted equity from my parents. The valuation was £180, 000 but my parents gifted the £90, 000 equity they had in the house.
    The sale price was recorded everywhere it needed to be as £180, 000 but only the £90, 000 changed hands (+solicitors costs from our savings).
    The SDLT form said 180,000 as advised by our solicitor but we were not liable as FTB anyway.
    The building society called it a consessionary purchase.
    • SDLT Geek
    • By SDLT Geek 13th Oct 18, 4:21 PM
    • 390 Posts
    • 237 Thanks
    SDLT Geek
    • #9
    • 13th Oct 18, 4:21 PM
    Gifted equity gifted deposit, concessionary purchase, transfer at undervalue
    • #9
    • 13th Oct 18, 4:21 PM
    Here are some thoughts on SDLT and "gifted equity" transactions, gifted deposits, concessionary sales and purchases at undervalue.

    First I should explain what I am not talking about. I have little to contribute as to which lenders will lend against the various arrangements, how much they lend or what they call the arrangements. They manage to cause confusion by using the word "deposit" in odd ways.

    Nor am I talking about developers selling new houses trying to maintain the headline selling price by offering a "gifted deposit" or other incentive.

    I am talking of cases where there is an act of generosity, usually between parents (sellers) and children (buyers) whereby the buyers end up with a property having paid less than its market value out of their own money / money they are borrowing.

    Concessionary purchase / transfer at undervalue / gifted equity

    This arrangement is as simple as the sellers selling for less than the market value. The contract and the transfer record the amount of cash passing. SDLT is then based on this lower figure if there is nothing else the buyers are giving in return.

    This is simple, except that not all lenders will allow it to be done this way! They also confuse things sometimes by talking about the "deposit" in an inconsistent way.

    Gifted deposit

    If the purchase is structured as a "gifted deposit" then the contract and transfer will record a higher figure, often the market value. Someone gifts the buyers cash which the buyers use to pay the sellers. SDLT is then due on that full stated sum.

    It is easy to follow this if it is a rich uncle and aunt who gift the money to the buyers for the buyers to pay to the sellers.

    But often the gift is provided by the sellers. "Real money" might not pass for the amount of the gift from the sellers to the buyers, as it would only have to be paid back as part of the purchase price. But a lender will often require the sellers to sign a document confirming that the money has been gifted. The "chargeable consideration" for SDLT is then the full gross sum treated as paid. The gift and the gross price might be recorded on a completion statement. Or the "gift" (without money actually passing) creates a debt owed by the sellers which is then extinguished when the property is transferred by the sellers (the chargeable consideration is then the actual cash passing plus the amount of the debt then extinguished).

    But

    Lenders sometimes confuse things by using terms like "gifted equity" "gifted deposit" and "deposit" loosely. The keys to securing an SDLT saving are that:
    • the contract and transfer can state the lower cash sum passing to the sellers
    • no document is required saying that a gift of cash is made to the buyers
    • the lenders are willing to accept the property as security when it is transferred at a price less than its market value.
    Last edited by SDLT Geek; 13-10-2018 at 9:03 PM.
    • Pityakka124
    • By Pityakka124 15th Oct 18, 10:58 AM
    • 18 Posts
    • 3 Thanks
    Pityakka124
    My solicitor is wording as such that if there’s no physical exchange of cash, then the SDLT form MUST stipulate the lower amount. He won’t budge on this. He said if they’re audited in the future, they must prove where the deposit came from. I think the lender and solicitor just arent singing from the same hymn sheet. My grandparents have already signed gift declarations etc... if the lender is happy for the arrangement, then legally the solicitor can record the transaction as 118k?
    • Pityakka124
    • By Pityakka124 15th Oct 18, 3:35 PM
    • 18 Posts
    • 3 Thanks
    Pityakka124
    Here are some thoughts on SDLT and "gifted equity" transactions, gifted deposits, concessionary sales and purchases at undervalue.

    First I should explain what I am not talking about. I have little to contribute as to which lenders will lend against the various arrangements, how much they lend or what they call the arrangements. They manage to cause confusion by using the word "deposit" in odd ways.

    Nor am I talking about developers selling new houses trying to maintain the headline selling price by offering a "gifted deposit" or other incentive.

    I am talking of cases where there is an act of generosity, usually between parents (sellers) and children (buyers) whereby the buyers end up with a property having paid less than its market value out of their own money / money they are borrowing.

    Concessionary purchase / transfer at undervalue / gifted equity

    This arrangement is as simple as the sellers selling for less than the market value. The contract and the transfer record the amount of cash passing. SDLT is then based on this lower figure if there is nothing else the buyers are giving in return.

    This is simple, except that not all lenders will allow it to be done this way! They also confuse things sometimes by talking about the "deposit" in an inconsistent way.

    Gifted deposit

    If the purchase is structured as a "gifted deposit" then the contract and transfer will record a higher figure, often the market value. Someone gifts the buyers cash which the buyers use to pay the sellers. SDLT is then due on that full stated sum.

    It is easy to follow this if it is a rich uncle and aunt who gift the money to the buyers for the buyers to pay to the sellers.

    But often the gift is provided by the sellers. "Real money" might not pass for the amount of the gift from the sellers to the buyers, as it would only have to be paid back as part of the purchase price. But a lender will often require the sellers to sign a document confirming that the money has been gifted. The "chargeable consideration" for SDLT is then the full gross sum treated as paid. The gift and the gross price might be recorded on a completion statement. Or the "gift" (without money actually passing) creates a debt owed by the sellers which is then extinguished when the property is transferred by the sellers (the chargeable consideration is then the actual cash passing plus the amount of the debt then extinguished).

    But

    Lenders sometimes confuse things by using terms like "gifted equity" "gifted deposit" and "deposit" loosely. The keys to securing an SDLT saving are that:
    • the contract and transfer can state the lower cash sum passing to the sellers
    • no document is required saying that a gift of cash is made to the buyers
    • the lenders are willing to accept the property as security when it is transferred at a price less than its market value.
    Originally posted by SDLT Geek
    I think I’m getting a clearer picture now.

    The lender explicitly state they accept gifted equity.

    The lender have then stated they can only borrow against the registered amount. In this case, the net consideration.

    This effectively means we’d need a 100% mortgage or to raise the deposit ourselves. This defeats the purpose of a gifted equity deposit.

    They have instructed a valuation, the surveyor has valued the property at 118K, therefore they have the security that the property is indeed worth more than we are purchasing for.

    I think they need to clarify their policy on ‘gifted equity’. I’m hoping this is resolved soon. It seems fairly straight forward to me and to our solicitor. The lender however, not so straight forward....
    • SDLT Geek
    • By SDLT Geek 16th Oct 18, 8:49 AM
    • 390 Posts
    • 237 Thanks
    SDLT Geek
    I think they need to clarify their policy on ‘gifted equity’. I’m hoping this is resolved soon. It seems fairly straight forward to me and to our solicitor. The lender however, not so straight forward....
    Originally posted by Pityakka124
    Yes, lenders do sometimes use the term "gifted equity" loosely. Let us hope that they mean it in the true sense (which could also be called a "concessionary purchase" or "transfer at undervalue") and that they do not have in mind a "gifted deposit" structure.

    What you are looking for is a structure where they accept that the contract and transfer will state the lower sum that is actually being paid and not documenting a cash gift of the difference between the value and the price.

    Hopefully the lender will be happy to lend against the value of the property rather than focusing on the price and will not be put off by it being a transaction at undervalue.
    • Pityakka124
    • By Pityakka124 16th Oct 18, 9:01 AM
    • 18 Posts
    • 3 Thanks
    Pityakka124
    Yes, lenders do sometimes use the term "gifted equity" loosely. Let us hope that they mean it in the true sense (which could also be called a "concessionary purchase" or "transfer at undervalue") and that they do not have in mind a "gifted deposit" structure.

    What you are looking for is a structure where they accept that the contract and transfer will state the lower sum that is actually being paid and not documenting a cash gift of the difference between the value and the price.

    Hopefully the lender will be happy to lend against the value of the property rather than focusing on the price and will not be put off by it being a transaction at undervalue.
    Originally posted by SDLT Geek
    If it is indeed the case that they’re using the term in the wrong sense, is there any way around it other than finding another lender?
    • davidmcn
    • By davidmcn 16th Oct 18, 9:24 AM
    • 9,315 Posts
    • 9,944 Thanks
    davidmcn
    I suspect you (or your broker or solicitor) just need to find someone sensible to talk to at the lender.
    • Pityakka124
    • By Pityakka124 17th Oct 18, 10:10 AM
    • 18 Posts
    • 3 Thanks
    Pityakka124
    The lender are completely adamant they want the value to be the registered amount and the solicitor is adamant that only the purchase price can be registered. Is there a way around this such as an assumption of debt included in the net consideration which is then cleared immediately after completion? It’s the only thing holding things up now I believe and I am so frustrated
    • Pixie5740
    • By Pixie5740 17th Oct 18, 11:20 AM
    • 13,366 Posts
    • 19,237 Thanks
    Pixie5740
    Find a different lender that accepts "gifted equity" and understands how it works.
    • Pityakka124
    • By Pityakka124 17th Oct 18, 11:42 AM
    • 18 Posts
    • 3 Thanks
    Pityakka124
    We really don’t want to have to go through this process again, it’s been ongoing since August. It’s so frustrating because the mortgage offer is there, it’s just hit a brick wall over 15k gifted equity with it being under the SDLT anyway
    • Pityakka124
    • By Pityakka124 17th Oct 18, 11:43 AM
    • 18 Posts
    • 3 Thanks
    Pityakka124
    The lender quite clearly state on their website they accept gifted equity at no extra charge.
    • SDLT Geek
    • By SDLT Geek 20th Oct 18, 8:52 AM
    • 390 Posts
    • 237 Thanks
    SDLT Geek
    I note from a posting you made on another thread that in your case it makes no difference to the SDLT payable whether the relevant price is the value of the property £118k or the net figure £103k. Also you say there that the deed of gift form which your grandparents have signed is ambiguous as to whether they are gifting you a sum of money or confirming the element of gift by selling at undervalue.

    You say the main problem is the figure the solicitor is to put on SDLT1.

    That is likely to be solved by looking at the TR1 (the transfer) and using the figure stated there for the price on the SDLT1.
    • SDLT Geek
    • By SDLT Geek 26th Oct 18, 12:35 PM
    • 390 Posts
    • 237 Thanks
    SDLT Geek
    OP, have you had this resolved now? Is this a case where the lender wanted the higher figure (£118K) put on the contract and transfer? If so has your solicitor now agreed that it is correct to put the same figure on the SDLT1 for stamp duty land tax purposes?
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,889Posts Today

6,664Users online

Martin's Twitter