Buying a House - Money from parents

I think you worry too much.They lend you (say) 10k and you pay them back at an agreed rate, with or without interest, as agreed. End of story. What you happen to spend the 10k (say) on is your business.

Jo the bit you getting muddled-up with re IHT:

If your parents give you a large sum of money (more than 2 x £3k because you can claim 2 years gift allowance) and then were unfortunate enough to die within 7 years, that gift would have a bearing on the IHT calculation although there'd probably be no IHT to pay on the gift itself.

People can give what they like to whomsoever they like so as Tumbleweed says, stop worrying.

The annual 3000 IHT allowance is per donor per year, so it may be possible to gift 12,000 (2 x 6000), if neither parent has utilised their allowance from the previous year.

As others have suggested, this isn't as tricky as you suspect. Here's my tuppence worth...

1. If the money is to be repaid to your parents eventually, gifting doesn't come in to it. Equally, eventual IHT calcs are unaffected, since the outstanding loan remains part of your parents' estate.
2. Ask you parents to make sure their will is in order; keep a note with the will which explains (briefly and simply) the terms of the loan. This could be crucial if there are other residual beneficiaries (siblings etc), and you don't want to find the loan is instantly repayable on death.
3. Keep your / their solicitor informed, and heed his / her advice.
4. If IHT is an issue anyway, get your parents to start planning to minimise it. Of course, "gifting" the money for your new home would be useful, presuming they survive the next 7 years. You could always gift it back later!
5. Make sure you've made a will yourself.

1. Invite your parents to a slap-up dinner as soon as you've moved in.

In message , Doug Ramage writes

Plus gifts out of income that don't affect standard of living, although I'm not sure quite how that is determined.

This understanding is false. There's no reason whatever why they counld not lend you the money, or gift it to you.

Of course if they gift it to you, there would be IHT implications, but that's nothing to worry your pretty little head about, since it could never be worse for you than the alternative of their only lending you the money.

If they lend the money, they could always "forgive" part of the loan each year by way of tax-exempt annual gifts.

Can't we try using 'give' instead of 'gift' again now, I'm fed up with using gift as a verb and it adds nothing at all to the meaning as far as I can make out.

Not so.

This is where it gets tricky.

The company that is giving you a mortgage will be doing so on the basis that

*you* are putting up the rest of the money from your own funds, rather than borrowing money elsewhere for the deposit.

If they think you are borrowing the deposit from elsewhere, they will withdraw the mortgage offer.

SO....

You need to be straight with them that the money is coming from your parents, and your parents must make it an unconditional gift.

There is nothing to stop you coming to an agreement that you will gift the same sum back to them at a later date, but it is vital that such an agreement was binding in honour only, and not enforceable.

not so, they won't care where the money has come from. Just as long as if they have to rerposses their is more equity in the property than the loan is worth. The bigger the deposit the less risk for the lender.

Only if they consider the other loan to be secured on the property, I would imagine. That "right" is reserved for the prime lender.

The OP should keep the parental loan relatively informal.

In message , Zoe Brown writes

But if you have borrowed from elsewhere you are less likely to be able to afford the repayments as you will be making payments on the other loan as well.

Oh but it does. It adds a certain lack of ambiguity. :-)

I know, the derivation of the noun "gift" is almost certainly the object of the verb "to give", i.e. "that which is given", but usually "a gift" means something given for love, i.e. without expectation of reciprocation.

But "to give" includes cases where there *is* such an expectation. "My parents gave me a loan to help me buy the flat." "I sold the old banger, this mug gave me five hundred quid for it."

Hence "to give" no longer unambiguously means "to give a gift", and if we want a verb to express that notion unambiguously, we need a new word for it, and the back-formation "to gift" is the obvious choice.

Live with it. If it's any consolation, I agree that overuse of the term does grate a bit, so if context already makes clear that one is talking about gifts, I'd be happy to use "give" more.

Verbing weirds language.

I think this really only applies where this money is borrowed commercially, (which includes privately in a way which is broadly equivalent to a commercial loan).

Not so. The reason for the lender's anxiousness is that the added borrowing will be tied to repayment commitments which conflict with the commitments they expect to themselves. It would throw their affordability calculations out.

Ho ho. A gift-and-gift-back is a loan, and it's inappropriate in this case to use the verb "to gift". :-)

Not necessarily. If the terms of the loan are that repayment (or payment of interest, if any) is not required until after obligations under the mortgage loan have ceased, then the mortgage lenders would have no reason to worry, because their position would not be compromised.

Essentially, a parental loan should always be indistinguishable from own funds. In practice they're usually unenforceable anyway.

Broviding the gift-back is not enforceable....

Indeed so.

However, it would upset their processing. They like things simple, so that they don't have to spend time decision making.

:-)

I know that when I put up the deposit for step-daughter, the Building Society insisted that I signed to say that it was an unconditional gift.

Just pretend you are an EU commissioner!

In message , Blackthorn writes

I have been leadified to understandificate it as verbification not verbing.

Well, just telling them that the funds are "your own savings" sounds pretty simple to me, and would not be for from the truth.

Hmm. "Put up" sounds like a loan. They insisted that you lie? :-)

They wanted to see that the money hadn't suddenly appeared in the account a week earlier :-)

No, they insisted that I made it into an unconditional gift, which I did.

She subsequently made a similar gift back to me (although she was not obliged to do so).