When it comes to Gifted Deposits, we often find that we are asked lots of questions. Below we will answer these questions in the simplest way we can, so you’re more up to speed when it comes to the mortgage process.
Your gifted deposit can be either the full amount or a portion of the deposit gifted by someone who is able to confirm, with an agreement that you do not need to pay the gifter back in the form of a loan.
Gifted Deposits are incredibly useful when customers have enough money for their monthly repayments but can’t afford the initial deposit for their home. You may also open yourself up to better rates if you are able to put down more deposit.
A Gifted Deposit can also be really helpful if you’re on a lower salary and can afford the monthly mortgage repayments but are unable to save your deposit upfront.
Generally speaking it is your parents who can gift you the deposit, though this can be extended beyond just birth parents, to adopted parents and legal guardians. You may see this mentioned online as the “bank of Mum & Dad”.
You do have the possibility of using other family members for a Gifted Deposit, though this completely depends on individual lenders, so would require care when trying to find the right mortgage lender.
We commonly find that clients aren’t aware that their parents can help with their mortgage, or don’t feel like they can approach them and ask for help. In truth, most parents are extremely willing to help their children get onto the property ladder.
Statistically, taking out a mortgage works out better than renting, due to you being able to potentially pay less per month on a property. Gifted Deposit can often come from inheritance, although parents have been known to gift it earlier on in life if they have saved enough already or have released a certain amount of equity from their own home.
Most lenders won’t accept a loan as a method of paying for your deposit, as this is an additional credit commitment and leaves the lender with uncertainty that you’d have enough disposable income to pay back both the loan and the mortgage at the same time.
There is no maximum limit on the amount of gift you can receive, though there are lenders out there that will insist that you put in at least 5% deposit from your own savings.
The people who benefit the most from this tend to be First-Time Buyers in York and Home Movers in York. It can also be useful when in conjunction with the Help-to-Buy Scheme, as the required 5% deposit, depending on the lender, can be paid via a gifted deposit.
The majority of lenders will require a gifted deposit form. Depending on the lender, you may be asked to provide additional proof and ID (things like donor ID or bank statements).