Mortgage deposit Gift

Mortgage deposit Gift

Didn't find your answer?

 My brother is looking to buy a flat to rent, where he is the legal owner. However,  my brother has a private agreement with a business partner of his, which will result in them both "benefiting" from the rental income. 

I have offered to "gift" the money to my brother, to raise funds to get a mortgage approved for this flat purchase. In return, my brother's business partner is looking to return the amount I gift to my brother, in leiu of a share in this property - is this allowed and what should I be aware of?

I am under the impression that when I gift the money, I will have to sign a letter declaring no interest in the property. Does the situation described above counter this?

Replies (25)

Please login or register to join the discussion.

By johngroganjga
17th Sep 2014 10:15

When you say "return the

When you say "return the amount" you gift, do you mean return to you?

If so what is the point?

Thanks (0)
avatar
By qwerty90
17th Sep 2014 10:36

Yes, return to me.

 

The point is that my brother's business partner does not want/cannot be the legal owner of the flat. I believe this is because he can't obtain a mortage using his own name, so wants to create this method of me "gifting" the money to my brother, and the equivalent money I gift, being refunded by the business partner which will allow him a share in to this property purchase (albeit in a private agreement between my brother/ his business partner)

 

Thanks (0)
Replying to Duggimon:
avatar
By User deleted
17th Sep 2014 12:47

.

qwerty90 wrote:

...so wants to create this method of me "gifting" the money to my brother, and the equivalent money I gift, being refunded by the business partner which will allow him a share in to this property purchase (albeit in a private agreement between my brother/ his business partner)

 

Funds are being loaned to the business partner through the brother

Whether it is on paper is a matter of semantics, there is a potential that the courts would likely argue that this is implicit in the OPs intentions.

 

The question becomes - "would the OP give the funds to the business partner if there was no hope of getting them back?"

Yes = gift

No = loan 

Thanks (0)
Portia profile image
By Portia Nina Levin
17th Sep 2014 11:02

You mean

Like a mortgage fraud?

Thanks (1)
Replying to Wilson Philips:
avatar
By qwerty90
17th Sep 2014 11:17

I'm not sure if this would be considered a mortgage fraud, but can someone explain the legal reasons why it would be considered that?

Thanks (0)
avatar
By bernard michael
17th Sep 2014 11:24

Because you are conniving in a scheme whereby a mortgage is granted that would not otherwise be given. Thereby you are causing the mortgagor to be put at risk and so will you if they find out what has happened were the mortgage to default 

Thanks (0)
David Winch
By David Winch
17th Sep 2014 11:27

Mortgage fraud

When a person applies for a mortgage they normally sign (or electronic equivalent) a form which includes a declaration.  That may say that the applicant is buying the property himself, that he will be the sole owner & that the remaining purchase monies are his own funds.

The reason for this is that the lenders do not want anyone else claiming any rights of ownership if they repossess & sell the property.

In this case the borrower might be making untrue statements to obtain the mortgage.  If that is done dishonestly it is mortgage fraud.

Remember that just because the Land Registry title says that XYZ owns ABC that may not be the end of the story . . .

Be careful you do not yourself commit a money laundering offence such as 'entering into an arrangement'.

David

Thanks (0)
By johngroganjga
17th Sep 2014 11:27

Then the brother's business partner should just gift the money to your brother.  No point in you being involved.

Thanks (0)
avatar
By User deleted
17th Sep 2014 12:34

The word gift is deceptive

It implies no legal or moral obligation to return the funds.

The fact that there is an agreement to return the funds implies that this is not a gift, but a loan.

Thanks (0)
Replying to Tickers:
By johngroganjga
17th Sep 2014 12:37

Gift

BananaMan wrote:

It implies no legal or moral obligation to return the funds.

The fact that there is an agreement to return the funds implies that this is not a gift, but a loan.

I agree that that is what the word "gift" implies.

But where are we told that there is an agreement to return the funds?

Thanks (0)
By johngroganjga
17th Sep 2014 13:55

Missing the point.  The OP's

Missing the point.  The OP's involvement is supremely pointless.  Cutting that out we are left with a movement of money from the business partner to the OP's brother, which we are told is a gift.

Of course I agree that if it is not a gift all sorts of exotic issues arise.  But where are we told that it is not a gift?

Thanks (0)
avatar
By User deleted
17th Sep 2014 13:42

 the equivalent money

being refunded by the business partner

 

EDIT - however, I believe I understand what you mean.

 

Thanks (0)
By johngroganjga
17th Sep 2014 13:41

Missing the point again. 

Missing the point again.  Where are we told that the money passed by the business partner to the OP's brother is not a gift?

Thanks (0)
Replying to legerman:
avatar
By WhichTyler
17th Sep 2014 13:52

Tangled web

johngroganjga wrote:

Where are we told that the money passed by the business partner to the OP's brother is not a gift?

 

OP says that the payment by business partner is 'in lieu of a share of the property'. Not hugely clear but I take it to mean he ends up with some of the proporty

Thanks (0)
avatar
By User deleted
17th Sep 2014 13:45

Is it not implied that because he is expecting a beneficial interest in the property that it is consideration and not a gift?

Thanks (0)
By johngroganjga
17th Sep 2014 14:04

Anything is possible of course.  We are told that there is a private arrangement between the two parties whereby they will share the rental income the property produces.

Thanks (0)
David Winch
By David Winch
17th Sep 2014 16:25

My concern is that we have here a person (described as the brother's business partner) planning to go to elaborate lengths to conceal the fact that he is the source of a sum of money.

This makes me suspicious that the person is engaged in tax evasion or other criminal conduct.

My advice to the OP is that he should have nothing to do with this because if he does he is at risk of being accused of one of the principal money laundering offences himself.

In the alternative he could seek consent for the arrangement from the NCA under s338 PoCA 2002 to avoid committing an offence under s328.  Obviously that involves disclosing details of the proposed arrangement to the authorities in advance of it going ahead.

David

Thanks (0)
avatar
By King_Maker
17th Sep 2014 21:06

This is likely to be mortgage fraud, if against the lender's T&Cs.

 

[Does not apply to MPs, if it qualifies under the Mandelson Manoeuvre rules.] 

Thanks (0)
avatar
By qwerty90
18th Sep 2014 08:27

The reason the gift is coming from me rather than the other party, is because most lenders dont accept gifts from non family members.

Is the arrangement against the law (assuming no criminal element is involved) or is it a matter for the mortgage lender's terms & conditions?

Thanks (0)
David Winch
By David Winch
18th Sep 2014 08:51

The issues are:-

1.  Is the mortgage lender being provided with incorrect / untrue information because the borrower perceives that if he provided the correct information he would not get the mortgage on as good terms (or perhaps would not get the mortgage at all)?

If YES then this looks like mortgage fraud

2.  Are the gifted / loaned monies from the business associate tainted with illegality?

If YES then this looks like money laundering

It seems to me that you are saying that, in truth, the gift from you is neither from you (it is from the business partner) nor is it a gift (because he effectively will be a part owner of the property).

If I were in your position would I agree to do this?  Absolutely not!

David

Thanks (0)
By johngroganjga
18th Sep 2014 08:53

Not sure what you mean by "lenders don't accept gifts" etc.  It's for the recipient of the gift (i.e. your brother in this case) to accept or reject any gifts offered.  What the lender thinks your brother should do doesn't come into it. So can you be more specific about what you say the lender will do if your brother receives a gift from his business partner without which he could not provide the equity required to complete the purchase?

Thanks (0)
Replying to Michael Davies:
avatar
By Kirkers
18th Sep 2014 09:03

Well

johngroganjga wrote:

Not sure what you mean by "lenders don't accept gifts" etc.  It's for the recipient of the gift (i.e. your brother in this case) to accept or reject any gifts offered.  What the lender thinks your brother should do doesn't come into it. So can you be more specific about what you say the lender will do if your brother receives a gift from his business partner without which he could not provide the equity required to complete the purchase?

Having recently applied for my own residential mortgage I think the OP is explaining that lenders will not acknowledge a 'gift of money' if it comes from outside the immediate family. Meaning that if you go for your mortgage appointment and say a friend gave me £5k for a deposit they'll decline the mortgage on the basis that they don't 'count' that gift  to be accepted for a deposit and therefore insufficient funds for a mortgage. The same rules apply to uncles and aunties nowadays in some banks; a gift from them doesn't count either. However if your mum, dad, brother, sister, son, daughter or grandparent gave you £5k that's perfectly acceptable.

It seems the OP is trying to get around the bank's T & Cs by receiving a sum of money from a family member rather than going to the bank and saying 'my business partner gave me the deposit' in which case they'll automatically decline to lend him the sum he's after.

Thanks (0)
avatar
By King_Maker
18th Sep 2014 08:54

As others have said, what "gift"?

There is no gift, if reciprocity is involved.

If you are reported to CIFAS, that is likely to have serious implications for your future credit applications.

https://www.cifas.org.uk/

 

Thanks (0)
By johngroganjga
18th Sep 2014 09:43

Well this isn't difficult is it?

Either the OP's involvement is pointless - in which case he should decline to be involved.

Or it serves a purpose which is dishonest - a conspiracy to deceive the lender as to the source of the money.  In which case the OP should even more so decline to be involved.

Thanks (0)
Replying to legerman:
avatar
By Kirkers
18th Sep 2014 09:58

100% Agree

johngroganjga wrote:

Well this isn't difficult is it?

Either the OP's involvement is pointless - in which case he should decline to be involved.

Or it serves a purpose which is dishonest - a conspiracy to deceive the lender as to the source of the money.  In which case the OP should even more so decline to be involved.

I agree 100% - its dishonest and he's purposely trying to avoid complying with the lenders T&Cs. I was merely pointing out why I believe the OP is trying to play this card.

Thanks (0)