Do banks not accept gifts from family friends?

cb123

I've run into a bit of a snafu.

I am thankfully in a position to apply for a mortgage, and I'm getting the last bits together.

I was talking to my broker today and she was not impressed that a large chunk of my deposit was gifted by a family friend/non-relation stating the banks only like it when it comes from a direct relative.

She mentioned on the phone (briefly) that they don't look at the source of where the money came from, just the letter. I'm not sure if she was hinting and telling me to lie? I don't want to ask again as I don't want anyone to get in trouble. She ended the call telling me to get the letter signed by the giftee.

Just to clarify, the money has been in my account for 12 months, it is a gift and is all mine.

I'm not sure what to do, are that banks that adamant on the money coming from family? Should I bluff and say it came from a parent or play the 'She's my godmother' card, or is that risky. Any advice would be great. I don't want to lie but I certainly don't want to jeopardise my chances of a mortgage because the money didn't come from the 'right' place. HELP!

I suppose there may be tax implications with a gift that's not from a parent?

Allinall

I would have no hesitation in saying that it came from a family member.

Banks have no problem not being up front with their customers.

ZX7R

Liable for gift tax if the amount lodged is over €3000

cb123

bubblypop wrote: »

I suppose there may be tax implications with a gift that's not from a parent?

Agreed, and this was one of the first things I looked into. As far as I know, the threshold for gifts from non-relatives is €16,250 which I have not exceeded and it seems you don't need to file a tax return until you've reached 80% of that, which I am not at yet.

Allinall wrote: »

I would have no hesitation in saying that it came from a family member.

Banks have no problem not being up front with their customers.

True, I guess. I'm just nervous as she lodged the money into my account using her name 12 months ago. The banks have only asked for 6-month statements, but this seems like it could get dicey.

cb123

ZX7R wrote: »

Liable for gift tax if the amount lodged is over €3000

Would you mind linking this information - as far as I am aware you can be gifted up to €16250 without tax implications and only need to file once you hit 80%.

Group C: https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-and-group-thresholds.aspx

https://www.revenue.ie/en/gains-gifts-and-inheritance/completing-your-gift-or-inheritance-tax-return-it38/how-do-you-know-if-you-should-file.aspx

ZX7R

cb123 wrote: »

Would you mind linking this information - as far as I am aware you can be gifted up to €16250 without tax implications and only need to file once you hit 80%.

Group C: https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-and-group-thresholds.aspx

https://www.revenue.ie/en/gains-gifts-and-inheritance/completing-your-gift-or-inheritance-tax-return-it38/how-do-you-know-if-you-should-file.aspx

I just goggled avoid paying gift tax in Ireland
Greenway financial advisers. Ie

Feisar

Allinall wrote: »

I would have no hesitation in saying that it came from a family member.

Banks have no problem not being up front with their customers.

Would it come back to haunt in say ten years time. OP pops their clogs (hopefully not!). And a partner is left with the debt?

Feisar

Feisar wrote: »

Would it come back to haunt in say ten years time. OP pops their clogs (hopefully not!). And a partner is left with the debt?

You have to get life/Mortgage insurance. No debt.

I don't know that much about this particular case but it is was 12 months ago I would just keep totally quiet and say nothing, which is not a lie.

ZX7R

cb123 wrote: »

Would you mind linking this information - as far as I am aware you can be gifted up to €16250 without tax implications and only need to file once you hit 80%.

Group C: https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-groups-and-group-thresholds.aspx

https://www.revenue.ie/en/gains-gifts-and-inheritance/completing-your-gift-or-inheritance-tax-return-it38/how-do-you-know-if-you-should-file.aspx

Plus the links you attached from revenue is based on if your related to the person gifting you the money.
You are not related it falls under dirt tax I believe

Allinall

Feisar wrote: »

Would it come back to haunt in say ten years time. OP pops their clogs (hopefully not!). And a partner is left with the debt?

Absolutely not.

The friend gave a gift. They didn't borrow any money.

Any tax implications are totally separate from the mortgage application, and frankly none of the banks business.

cruizer101

The 16,250 is a lifetime gift amount exemption for group c.
The 3,000 is a yearly limit under which no tax has to be paid and doesn't go towards the lifetime limit, it is between anyone, so in theory if someone gave you 3,000 a year for 20 years you could get 60k tax free from them, and still wouldn't hit the 16,250 limit.

You are correct with the 16,250.

If it is under the limit it is not a massive gift anyway, I would just be honest and get a letter from them to send to the bank.
Unless the bank asks for it I don't see that the letter has to say whether or not they are a relation.

Edit to add

ZX7R wrote: »

Plus the links you attached from revenue is based on if your related to the person gifting you the money.
You are not related it falls under dirt tax I believe

Group C says: The Group C threshold applies where you, the beneficiary, on the date of the gift or inheritance have a relationship to the disponer not already covered in Groups A or B. I.e anyone not in group A or B

blastman

AS far as I can see, the OP is right, you would be CAT Group C as you aren't related to the gifter as you've said and you can receive €16250 before you need to pay CAT on the gift.

macsauce

blastman wrote: »

AS far as I can see, the OP is right, you would be CAT Group C as you aren't related to the gifter as you've said and you can receive €16250 before you need to pay CAT on the gift.

I think you can INHERIT up to €16250 from a person before paying tax but as someone has already said you can only receive a gift up to €3,000 before paying tax. That limit is per gifter and per recipient. So if you have a partner and the giftter has a partner that could be €12,000 you can receive before paying tax.

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions/small-gift-exemption/index.aspx#:~:text=You%20may%20receive%20a%20gift,disponer%20is%20exempt%20from%20CAT.

ZX7R

Allinall wrote: »

Absolutely not.

The friend gave a gift. They didn't borrow any money.

Any tax implications are totally separate from the mortgage application, and frankly none of the banks business.

No the tax implications are not separate, a bank won't lend on a deposit if the money's are not clear of owed taxes.
Even with a letter stating the cash was a gift they may request from the poster proof that all taxes on the money are paid

cb123

Thanks everyone for the replies.

I'm pretty confident regarding the tax implications. Cheers

cruizer101 wrote: »

Unless the bank asks for it I don't see that the letter has to say whether or not they are a relation.

Unfortunately they do ask for the relationship on the gift letter.

PO!NT wrote: »

The bank will have 0 issue.

They will send you a form that the person who gave you the money needs to fill out to say it’s a gift that doesn’t need to be repaid and that they have no share in the house.

I think this route might be best (and easiest). I should have said nothing in the first place.

There are two issues here:

1. The person giving you the money is entitled to a claim on your property. By providing a % of the purchase price they are entitled in law to a % of the equity in your property. The Bank normally gets round this by having the person giving the money sign a declaration of waiver of interest. But they generally don't like this with non-family because there is no automatic presumption that the money is a gift. However, they'll still do it.

2. Do not lie. You have to set out to the Bank by way of sworn declaration that everything you have said to them is true. Though it's unlikely to affect you down the line why on earth take the chance? It would technically be a breach of the contract terms or a misrepresentation so you'd be leaving yourself open to a (small) risk for no reason.

Banks want to lend money. It earns way more for them if they give it to you than if they don't. If your reasonable living expenses are such that you can make the monthly repayments and you also have the deposit then there's really a tiny chance they'll reject the application.

Allinall

Deleted User wrote: »

There are two issues here:

1. The person giving you the money is entitled to a claim on your property. By providing a % of the purchase price they are entitled in law to a % of the equity in your property. The Bank normally gets round this by having the person giving the money sign a declaration of waiver of interest. But they generally don't like this with non-family because there is no automatic presumption that the money is a gift. However, they'll still do it.

2. Do not lie. You have to set out to the Bank by way of sworn declaration that everything you have said to them is true. Though it's unlikely to affect you down the line why on earth take the chance? It would technically be a breach of the contract terms or a misrepresentation so you'd be leaving yourself open to a (small) risk for no reason.

Banks want to lend money. It earns way more for them if they give it to you than if they don't. If your reasonable living expenses are such that you can make the monthly repayments and you also have the deposit then there's really a tiny chance they'll reject the application.

Where on earth are you getting this from?

cb123

PO!NT wrote: »

I got a mortgage last year. They give you a form for the gift.

Yes, I was sent the gift letter/form template today.

Louis Friend

Lots of nonsense and misinformation on this thread.

The first €3,000 of any GIFT from anyone each year is tax-free.

In addition, €16,250 of gift or inheritances from “strangers” is tax-free.

A bank will just ask the person who made the gift to sign a form stating that is was a gift. This is because otherwise, it’s a loan, and that would mean less ability to repay the mortgage.

One doesn’t have to submit a tax return until one gets to 80% of the €16,250 threshold (even though no tax is payable until the threshold is breached.

So, for example, I can get 100 gift of €3,000 every year from a hundred different people tax-free.

Or, for example, €19,250 from one “stranger” in a given year tax-free.

But the €16,250 is a lifetime allowance.

cb123

Louis Friend wrote: »

Lots of nonsense and misinformation on this thread.

The first €3,000 of any GIFT from anyone each year is tax-free.

In addition, €16,250 of gift or inheritances from “strangers” is tax-free.

A bank will just ask the person who made the gift to sign a form stating that is was a gift. This is because otherwise, it’s a loan, and that would mean less ability to repay the mortgage.

One doesn’t have to submit a tax return until one gets to 80% of the €16,250 threshold (even though no tax is payable until the threshold is breached.

So, for example, I can get 100 gift of €3,000 every year from a hundred different people tax-free.

Or, for example, €19,250 from one “stranger” in a given year tax-free.

But the €16,250 is a lifetime allowance.

Thanks, and thanks to everyone who contributed their input.

The €16250 limit and to declare at 80% is my understanding of the tax, and I don't have to worry as I'm not expecting any more large gifts from non-relatives- unfortunately not a habit of mine

Regarding the letter, the broker sent on the form - it seems simple, declare who they are, our relationship, that it is a gift and want no claim to the property.

I was just taken aback by the broker hesitation when I mentioned the money wasn't from a relative and the small but brief hint that they don't look past the letter regarding where the money came from.

Fingers and toes crossed that the bank will accept the letter and approve the mortgage.

Feisar

Allinall wrote: »

Absolutely not.

The friend gave a gift. They didn't borrow any money.

Any tax implications are totally separate from the mortgage application, and frankly none of the banks business.

If asked and one says it came from family which in this case is a lie do you not think it'd be a great way for the insurer to wheedle out of paying up?

Allinall

Feisar wrote: »

If asked and one says it came from family which in this case is a lie do you not think it'd be a great way for the insurer to wheedle out of paying up?

What insurer?

If it's mortgage protection, then no. The deposit doesn't form any part of the mortgage. It's paid directly to the seller.

Dav010

Feisar wrote: »

If asked and one says it came from family which in this case is a lie do you not think it'd be a great way for the insurer to wheedle out of paying up?

Do insurers ask where you got the deposit?

Louis Friend

Dav010 wrote: »

Do insurers ask where you got the deposit?

What insurers?

chops018

Deleted User wrote: »

There are two issues here:

1. The person giving you the money is entitled to a claim on your property. By providing a % of the purchase price they are entitled in law to a % of the equity in your property. The Bank normally gets round this by having the person giving the money sign a declaration of waiver of interest. But they generally don't like this with non-family because there is no automatic presumption that the money is a gift. However, they'll still do it.

2. Do not lie. You have to set out to the Bank by way of sworn declaration that everything you have said to them is true. Though it's unlikely to affect you down the line why on earth take the chance? It would technically be a breach of the contract terms or a misrepresentation so you'd be leaving yourself open to a (small) risk for no reason.

Banks want to lend money. It earns way more for them if they give it to you than if they don't. If your reasonable living expenses are such that you can make the monthly repayments and you also have the deposit then there's really a tiny chance they'll reject the application.

Allinall wrote: »

Where on earth are you getting this from?

This is it exactly. I'm a solicitor who deals primarily with property. A person who gives someone money towards the purchase of a house may have a beneficial interest in that house. For example, if the back had to repossess the house this person may come out of the woodwork and say that they can't do this unless this person who gave the money is sorted and as they gave the money before the bank did they rank in priority to them. The bank want a first legal charge over the property and receiving a gift of money towards the purchase of the property just throws up uncertainties for them in this regard. As has been mentioned usually a letter stating it's a gift from the donor and that they have no interest in the property is enough. However, sometimes the bank look for a Deed of Confirmation/Postponement which the donor signs postponing any interest or right that they may have in the property and confirming that the banks charge will rank ahead of them.

Feisar

Dav010 wrote: »

Do insurers ask where you got the deposit?

If one was to lie I'm sure the insurer could use it? `I got my insurance through the bank at the time.

tcif

Allinall wrote: »

Any tax implications are totally separate from the mortgage application, and frankly none of the banks business.

Monies potentially owed to Revenue are factored into the banks calculations for repayment capacity / surplus funding as it will alter your financial bottom line when you've paid them (assuming the tax bill is still outstanding at the time of application).

Padre_Pio

cb123 wrote: »

I'm not sure what to do, are that banks that adamant on the money coming from family? Should I bluff and say it came from a parent or play the 'She's my godmother' card, or is that risky. Any advice would be great. I don't want to lie but I certainly don't want to jeopardise my chances of a mortgage because the money didn't come from the 'right' place. HELP!

Banks may also ask the friend to sign a letter waiving their right to any interest in the property.

Louis Friend

It’s been established that the bank want a form signed stating that the monies are a gift.

It’s been established that the gift is less than €19,250, so there’s no tax payable.

This a clear-cut case.

TheChizler

Louis Friend wrote: »

It’s been established that the bank want a form signed stating that the monies are a gift.

I thought this hasn't got past the broker yet?

Personally my own broker wasn't interested in anything older than 6 months.