Who can give a gifted deposit?
When it comes to a gifted deposit mortgage, lenders want to know where the money you have received has come from. Generally, gifts from immediate family members such as parents, grandparents and siblings will pose few problems.
However, some lenders are reluctant to accept a gifted deposit that has come courtesy of distant relatives or from a friend and could even turn you away. For this reason, it’s always best to check with a mortgage company its rules surrounding gifted deposit mortgages.
How can a gifted deposit help you to get a mortgage?
Getting a mortgage as a first-time buyer, and raising a deposit, can be a challenge financially, and for many, a gifted deposit from family is the only way to hasten progress towards homeownership.
Other than widening your choice to include higher deposit mortgages, using a gifted deposit should have no bearing on the type of mortgage you can attain – lenders don’t have specifically gifted deposit mortgages. However, you should always be upfront about your intention to use a gifted deposit in the early stages of applying for a mortgage to help smooth the path through the anti-money laundering checks.
To this end, mortgage lenders will ask borrowers with a gifted deposit to provide certain documentation with a gifted deposit mortgage.
You should always take the help of licensed conveyancing solicitors such as AVRillo for property dealings as they have lots of experience managing property deals. They are rated as the top property conveyancing solicitors in Reading.
How to prove a gifted deposit?
In a gifted deposit mortgage to prove that a gifted deposit is a gift, lenders require a ‘gifted deposit letter’, written by whoever has given you the funds, to confirm that there is no obligation to pay the funds back, as you would with a loan. Most lenders and mortgage advisers have a gifted deposit letter template to help, or you can arrange for your gift to produce their own letter, which they should sign and date in the presence of a witness.
For money laundering purposes, mortgage lenders will usually require that a giftor provides a form of photo identification, proof of address and copies of their bank statements, too.
The pros and cons of a gifted deposit
For many first-time buyers, a gifted deposit mortgage will be the quickest or, perhaps, the only way to turn their homeownership aspirations into reality. If you have a smaller deposit, and this is supplemented by a gifted deposit, you could benefit from lower mortgage rates, and therefore more affordable monthly payments, too.
On the downside, your giftor’s generosity will cause them some extra work in the way of writing a gifted deposit letter and providing other information as required. And while there are no immediate tax implications for either you as the recipient or the giftee, inheritance tax could become an issue in the future.