Family members will often assist buyers with their purchase by way of a cash gift. Lenders have strict requirements however.
The donor of the cash gift must be a close family member and the lender will want them to write a letter confirming:
• The amount of the gift.
• Whether the gift is repayable.
• Whether the donor has an interest in the property.
• The relationship, i.e. parent, sister. grandparent.
• Whether the donor will occupy the property.
For the avoidance of doubt a family friend gifting money is not generally acceptable to lenders. It will not meet their criteria.
Hopefully the donor gift issue was dealt with by the mortgage broker during the application process. If so, they should provide the Conveyancer with this. If not, the Conveyancer will request a donor gift letter before proceeding.
The donor must supply the donor gift letter, identification, source of funds and source of wealth evidence. These may include bank statements, savings account statements, P60s, payslips and proof of how the funds accrued over time. Even if you have already done this it is very unlikely the broker would have shared this with your Conveyancer.
Your lender MUST be informed of any monetary gift, payment, or price reduction. Lender consent is required prior to exchange. Your Conveyancer acts for you AND the Mortgage Lender and is required to tell the lender once they become aware of a gift. A referral to the lender mid-transaction will slow a matter down as lenders can take 5 to 10 working days to respond.
Hiding a donor gift is unlikely to be successful bearing in mind your Conveyancer is required to check source of funds and Bank Statements. You also risk delaying your transaction by not being upfront about the circumstances.
SELLER GIFTED DEPOSITS
Seller gifted deposits (cash reductions) are an absolute 'no' for lenders. The purchase price quoted in the mortgage offer must be the one paid.
NB: Where you have a mortgage, the donor is required to confirm that the gift WILL NOT be repayable and that they WILL NOT acquire any interest in the property. If this is not the case, and the gift is repayable, then your mortgage lender needs to consent to this arrangement as their security must take priority.
ID & Source of Funds
The donor is also required to provide Proof of Identity & Proof of Address under current regulations. Plus a full paper trail and explanation as to how funds were accumulated. Conveyancers are heavily regulated regarding this. The Government has made Conveyancers frontline in combatting monetary fraud, identity theft, property related criminal activity, financial crimes and money laundering. The profession has no choice and form’s risk huge penalties and prison time for non-compliance.
Your Conveyancer will require original or certified copies of the donor’s ID plus source of funds evidence. This means how the monies were acquired, not just where held. You cannot proceed without this as that puts your Conveyancer in breach of regulations and their duty of care to your lender.
A donor gift may affect your mortgage and could delay your matter. Especially where your lender is unaware of it. Be clear up front to avoid issues later on.
See my other articles on Mortgage offers and source of funds for further information about the mortgage and your Conveyancing matter.
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