Gifted deposit, how would the lender see it?

aby1

Hi all,

Hope I have put this in the right forum. I'd appreciate any views on this....

I'm not sure how much to include or how much information you need to answer the question. I don't want to put too much in incase it comes across as an ad but I'll answer any questions that may be relevant and would help you to help me.

If a house buyer seeking a mortgage got a gift of a deposit would the bank look negatively on it? Would they consider that the buyer had no real financial interest in the house because they didn't put up any of their own money or is a deposit a deposit at the end of the day?

Hope someone can help and TIA

Sleepy

Once you prove that you can afford the loan the bank won't care where the deposit came from.

aby1

Hi Sleepy, thanks for replying. I had thought that myself but someone told me recently that the lender would see it as a higher risk because there was no real financial input from the buyer and if they decided to up and leave they would have nothing to loose. The way I see it they would have an awful lot to loose...legal proceedings against them, bad credit rating for life etc.

Anyway thanks again. Appreciate it

Beruthiel

You go to the bank.
You tell them how much the house is.
You tell them what you want to borrow and that you already have X amount for the deposit.
There is no need for you to tell them anything other than that.
None of their business.

The_Conductor

Sleepy wrote: »

Once you prove that you can afford the loan the bank won't care where the deposit came from.

As long as you haven't borrowed the money elsewhere- and the 'gift' is not expected to be repaid.

Note: there may be tax implications associated with receiving a 'gift' of the deposit (there isn't enough info here to advise on it though).

aby1

Hi folks, thanks for your posts.

The gift is between vendor and buyer so a complete stranger but I've checked it out and there would not be any gift tax payable on an amount under 21,700 under group C.

Think all should be fine. I know there's a 'thank you' icon or button somewhere but I have no idea where so I'll just say a big thanks for replying.

Take care, cheers.

stepbar

Beruthiel wrote: »

You go to the bank.
You tell them how much the house is.
You tell them what you want to borrow and that you already have X amount for the deposit.
There is no need for you to tell them anything other than that.
None of their business.

Really eh? :rolleyes:

None of the banks business what your income / expenditure is? As well as that they would want to know where the deposit is coming from (as in this case it's a Gift but however they would err on the side of caution in terms of the amount i.e Gift tax maybe liable).

It is their business.

godtabh

aby1 wrote: »

Hi folks, thanks for your posts.

The gift is between vendor and buyer so a complete stranger but I've checked it out and there would not be any gift tax payable on an amount under 21,700 under group C.

Think all should be fine. I know there's a 'thank you' icon or button somewhere but I have no idea where so I'll just say a big thanks for replying.

Take care, cheers.

That sounds like a loan to me. No stranger is going to gift a deposit

aby1

Hi Kearnsr,

It's definately not a loan. I'm the vendor and if I can find a buyer who can get a mortgage but who hasn't got enough for a deposit I'm going to give it to them. I could reduce the price but that's not going to help the people who have no deposits so I'm going to keep it at the market value and give the deposit to the buyer. No strings, no loans, no favours, no retaining interest in the house. We're paying two mortgages and this is a last resort. Anyone who buys it and takes the money will be helping us as much as we're helping them.

Thanks for replying.

Cheers.

eman66

Looks like the recipient of your gift might fall under Group C here.

While your plan does make some sense, I wouldn't say lenders would like it very much. They're looking for any excuse at the moment.

aby1

Hi Eman66,

Someone else said that to me which is what brought me here. I hope you're not right. Really if they would give a mortgage to someone who had received the money from their parents why should it be any different because I give it to them? If they have met all the other criteria and can get approval based on earnings etc then as I said in an earlier post they are just as likely/unlikely to stop paying their mortgage as someone who has saved it themselves.

I had looked into the gift tax and I can give up to 21,700 without the buyer having to pay tax on it provided they havn't received money from anyone else in group C before because the limit is a lifetime one.

Not got a buyer yet though but I've advertised the house and what we want to do so fingers crossed.

Cheers everyone

EyesOnly

Hi OP im in a similar situation to you, my parents give me money for the booking deposit as a gift. I have been told by my solicitor that they have to sign a few forms and the actual bank form(cant remember which) stating that they don't want the money back and don't hold a stack in the house. Other than that the bank didnt care.

hope that helps.

[edit] hmm i should of read all the thread . But it should be the same were you just sign saying you hold no stack in the house and the money is a gift and not a loan.

aby1

cheers EyesOnly,

It does help. I wouldn't mind signing whatever was needed.

Best wishes with your new house.

aby1

I've just seen you're in Roscommon too. Don't suppose you have any friends looking to buy? <<hopeful grin>>

Take it easy

TurkeyBurger

EyesOnly wrote: »

that they have to sign a few forms and the actual bank form(cant remember which) stating that they don't want the money back and don't hold a stack in the house.

This also applied to parents helping out with the deposit.

In my case anyway.

astrofool

So, someone puts a booking deposit down, you gift them money, they pull out. You have no legal recourse to get your money back.

aby1

Thanks TurkeyB

Hi AstroF,

I would be giving my solicitor the deposit cheque to hold onto until mortgage monies had been received and contracts signed. I'd also have to give another cheque for the remaining balance on my mortgage for my bank to release the deeds which I wouldn't want to be handed over to my bank until the deal was done because the only way we can afford to use the spare cash we have is if we are free of the mortgage. When I bought the house my deposit cheque was given to the sellers solicitor. Would it not work the same way?

The_Conductor

aby1- to be perfectly honest, I really don't see how a mortgage lender is going to view this as anything other than a reduction in the price of the property.

A purchaser will have to inform their lender of the source of their deposit- and it doesn't take much to put two and two together to figure that the seller is the gifter of the deposit.

While I understand wholly where you are coming from- I frankly don't see whats in it for a lender to accept your 'gift' as a deposit- if a purchaser is unable to save a deposit, they probably shouldn't be buying in the first instance. This is the way mortgage lenders think. It would not be seen as prudent lending practice to accept what you're proposing.

aby1

Mornin Smccarrick,

Thanks for replying. I can see what you mean but if the price is reduced below the average market estimate that can technically be deemed a gift also. If for instance my mother wanted to sell me her home for 50,000 when it's market value is much higher, 50,000 is subtracted from the mv and I still have that figure taken from the lifetime figure allowable from parent to child. Same applies with complete strangers and the figure allowable for them in group C.

Someone else said to me it may be seen as a way for the buyer to get a 100% mortgage but I'm selling at the mv and paying 10% of it. If I was selling at 20,000 higher than the mv then then the banks valuer would note that and there could be all sorts of problems.

I know it seems crazy but there really is nothing untoward about it. I bought the house before I knew he and I would be planning a life together. I was a single working mother and I wanted to have a home and stability for my daughter. Things have changed and we are now paying both our mortgages. We're not trying to cheat anyone or pull off some dodgy scheme (though I concede it could appear that way) we're just trying to keep ourselves on track and by doing this for someone else we are helping ourselves a great deal. We're using our savings to give us some peace of mind over the next few years. No point having it in the bank and paying off the mortgage every month when we're strapped and just letting it dwindle away.

Even if we have a buyer who has their deposit we are going to give them the money. I'm not going to go into my faith but I trust what we are doing is right for us. It's not loosing money, it's getting our lives back, that's worth more than we could give anyone but for now 20k can go along way.

I really appreciate all your replies. Thank you all so much.

astrofool

aby1 wrote: »

Thanks TurkeyB

Hi AstroF,

I would be giving my solicitor the deposit cheque to hold onto until mortgage monies had been received and contracts signed. I'd also have to give another cheque for the remaining balance on my mortgage for my bank to release the deeds which I wouldn't want to be handed over to my bank until the deal was done because the only way we can afford to use the spare cash we have is if we are free of the mortgage. When I bought the house my deposit cheque was given to the sellers solicitor. Would it not work the same way?

The bank will want to see funds from the buyer that they have enough for the deposit, the cheque would be lodged with the buyers solicitor, not your solicitor, at this point, you have gifted your money, they can pull out, with your gift.

Any other way, it is just a reduction in price, and the bank will still want the buyer to make up the rest of the mortgage. The banks valuer will also look at the house, and similar houses in the area to work out market value.

The_Conductor

astrofool wrote: »

The bank will want to see funds from the buyer that they have enough for the deposit, the cheque would be lodged with the buyers solicitor, not your solicitor, at this point, you have gifted your money, they can pull out, with your gift.

Any other way, it is just a reduction in price, and the bank will still want the buyer to make up the rest of the mortgage. The banks valuer will also look at the house, and similar houses in the area to work out market value.

Depending on the mortgage lender- not only are they comparing the property with comparable properties in the area- often they are applying a flatrate 15 or 20% deduction on the 'market value' to arrive at a 'mortgage value'.

OP- when you are only able to sell your house by offering a gift of 20k- no matter how you structure it- you are effectively reducing its 'value' by 20k- and whether you accept it or not- are by your own actions- affecting the market value both of your property but also of similar properties in the area.

aby1

Hi again folks.

If I'm honest, what you've both said is not what I wanted to hear but I didn't come here for a 'cherry on top' answer so I appreciate you taking the time to help me and saying it like it is. We didn't really see it the way you have put it. The way we were looking at it we are going to spend that money on the mortgage over the next two years anyway so why not use it to our advantage now and at the same time give someone else a break but I see where you're coming from so I guess it's back to the drawing board!

Cheers

tHE vAGGABOND

When I bought I got a gift towards the price from a close relation. [I had deposit and more, this was an amount on top[.

When you go them and say I have x grand - they want to know where it came from and want you to prove it [fraud laws].

All the bank wanted from me was a letter signed by us both, saying it was a gift to me personally and the other person would not have any other rights to the property at all.