How to get a mortgage with a gifted deposit?
First time buyers in Sheffield are relying on gifted deposits to get a mortgage. Find out what a gifted deposit is and how it can help your get onto the property ladder.
While the market has gotten tighter with rules, making it more challenging than it used to be to obtain a mortgage. It can still be possible to buy a property in certain situations.
For example, after spending over three years in the same rental property from the local authority, be that a housing association or council. You may be eligible to buy a property under the Right-to-Buy Scheme in Sheffield. We have seen that they may allow you to use the equity from that property in place of a deposit in some cases.
In most cases, people get around the long and stressful process of saving up their deposit by being given a Gifted Deposit. A gifted deposit is when a homebuyer receives money to use as a down payment on a property. Depending on the amount given, it could be used for the whole deposit or just a portion of it.
Gifted Deposits FAQs
Who can gift the deposit?
Most lenders will have specifications on who can and cannot gift a deposit. If you consider buying a house with your parent’s money ‘bank of mum and dad’, this is the source of funds people often ask. Other family members such as grandparents and siblings are usually allowed.
That said, More distant family members such as aunties and uncles are much less likely to be permitted. A mortgage deposit gift from friends, meanwhile, is improbable to be accepted.
If you’re a parent looking to get your children on the property ladder, a gifted deposit is a good way of doing so!
If the person gifting to you is aged over 55, they may look to take out Equity Release in Sheffield as a means of gifting you a deposit.
Can it be a loan rather than a gift?
In most situations, it will need to be a gift, with the lender requiring that the donor sign a letter (which we can help prepare) to confirm the funds are non-refundable, and they will not put a “charge” on the property you are buying. There are exceptions out there, with at least one notable lender who will accept this.
That said, you must be careful, as taking out a personal loan just before applying for a mortgage will most likely negatively affect your credit score, which could lead to a mortgage application being rejected.
Also, the mortgage lender will have to take the monthly payments for the loan when they are calculating how much they will lend you.
How much can be gifted for a deposit?
There is no maximum limit on the amount of gift you can receive. But most lenders will insist you put in at least a 5% deposit from your funds.
Are you looking for a Mortgage Advisor in Sheffield?
As an open and honest mortgage broker in Sheffield, we can utilise our extensive panel of lenders to search through 1000’s of Right to Buy Mortgage deals for you.
We aim to offer help and guidance during the process, answering any questions you may have along the way. We even aid with other services when necessary, such as conveyancing.
Date Last Edited: September 15, 2023
