Why “Bring your Mum” is not an unreasonable request from your solicitor and why it matters where your deposit comes from.
There are very few scenarios we face as adults which require you to comply with a request to bring along your parents. Gifted deposits are one of them.
Gifted deposits might sound like the kind of child you award a scholarship to and pack off to independent school, but that’s not the kind of gifted we’re talking about.
In our world it’s the technical term for money given, usually (but not always) by parents, which goes towards a deposit on a house. It’s a wonderfully benevolent thing to do, but actually means we have to complete quite a lot of paperwork to ensure that the mortgage lender will be happy. I say benevolent, but I would pay a considerable amount of money to see my children leave home, so its probably not that altruistic after all.
Let’s set a bit of context…
The National Crime Agency estimates that money laundered through the property industry adds up to billions of pounds each year. It is one of our roles as solicitors to ensure that our clients are not party to those kind of shenanigans, and we are required to do proper checks on the origins of money used to purchase property.
If you have been given money to use towards a deposit, we will need to see where it came from as part of those checks. And that means not only being able to prove who gave you the money, but where they got it from too.
Sometimes the easiest answer is to bring along your parents (and their ID) to one of our meetings. (We accept it isn’t reasonable to ship Pa from Penzance to Pontefract, so of course we can do the checks remotely if needs be.)
Another complication is that someone giving a gift of money towards a house purchase might in future try to claim an interest in the property. This makes mortgage companies wriggle in their seats with discomfort, so we have to assure them, usually by way of a signed letter from the person giving the gift, that this will not be the case.
In short, if you’ve been given money towards your deposit we will need to:
1. Be informed that it’s a gift. Putting the money into your bank account and hoping this won’t be spotted is folly. It will, and then we’ll have to do the paperwork, but it will create a delay and you’re unlikely to be moving in when you expected
2. Create a suitable record that the money is a gift and not a loan in order to keep the mortgage lender’s blood-pressure under control – this is usually by way of a formal “Gifted Deposit Declaration”
3. Confirm the identity of the person or people making the gift using a passport or driving licence (not just so we can laugh at the embarrassing picture)
4. Collate proof of where the money came from. The answer could be a simple – from the sale of the family home or drawn down from a pension for example, but there are also more tricky scenarios, so we’ll advise you when we’ve had the conversation about your particular circumstances
As with everything, we will explain what’s required and why as part of the time we spend with you. Buying a house is usually the single-biggest purchase people make – and it’s an emotional as well as financial process. We’re here to guide you through it as smoothly as possible. (But we still can’t tell you exactly how long it will take because that’s not within our control, sorry!)