When is a gift not a gift?
A common line of questions we receive at Advanced Mortgage Solutions surrounds the giving and receiving of gifts. This is in regards to property purchases. This quick guide may help you determine which situation you are in, however, our advisers are here to answer questions specific to your needs.
The definition of a gift
A gift is a sum of money that is being gifted from a family member to help with the deposit funds. Hence when purchasing a property or pay down debt.
The rules around a gift
- A gift is a sum of money that is given to the recipient without any requirement to pay the gift back. There are no exceptions to this rule.
- A gift can only be received by a family member
- No encumbrance can be registered against the Title of the property being purchased by the person giving the gift.
How a lender views a gift verses a loan
All banks view the difference between a gift or a loan the same, viewing each as they are financially.
A gift, deed of gift and a deed of forgiveness of debt are all gifts. Because they state there is no repayment either through principal and interest or interest only repayments.
However as soon as there is mention of a loan being repaid (regardless of the time period being stated for the repayment i.e. no repayments for 20 years) then the sum is no longer a gift but a loan.
Since the introduction of the Responsible Lending Code in June 2015 it was made clear that securing a loan in order to secure a loan is not a responsible practice. For example, securing a loan to bolster a deposit to secure a home loan or mortgage is not encouraged.
Published by Scott Miller
Today's announcement on Mortgage Holidays
With today’s announcement by the Finance Minister about 6-month mortgage holidays, we have been inundated by enquiries from our clients.
We are very excited as the consents were lodged for our build & hold project in Hamilton this week .Our rental purchase in Ashburton is now fully tenanted & is very cash flow positive!Ken & Louise Emshey - 12th November 2009 - 12 November 2009
Everyone who helped us at Advanced mortgage solutions was great, extremely friendly and relaxed, while maintaining excellent professionalism and quality of service.Sean and Latasha Templeton - 26th March 2015 - 26 March 2015
AMS provided excellent advice and a great range of finance options to meet our requirements. Scott Helped us throughout the process and removed a lot of the hassle that you normally go through working directly with the banks.Evan and Nadja Beker - 21 March 2012 - 21 March 2012