When it comes to Gifted Deposits, we felt it was best to answer some popular FAQ’s that gets brought up. We will answer these most simply, so you’re more up to speed regarding Gifted Deposits and how they can massively help you onto the property ladder. The crucial thing is that it’s a gift, with no agreement for the homebuyer to repay the money.
Your gifted deposit can be either the total amount or a portion of the deposit gifted by someone who can confirm, with an agreement that you do not need to pay the gifter back in the form of a loan.
Gifted Deposits are beneficial when customers have enough money for their monthly repayments but can’t afford their home’s initial deposit. You may also open yourself up to better rates if you can put down more deposit.
A Gifted Deposit can also be beneficial if you’re on a lower salary and can afford the monthly mortgage repayments but cannot save your deposit upfront.
Generally speaking, your parents can gift you the deposit, though this can get extended beyond just birth parents to adopted parents and legal guardians. You may have come across the phrase the “bank of Mum & Dad”.
You do have the possibility of using other family members for a Gifted Deposit, though this entirely depends on individual lenders, so it 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 highly willing to help their children get onto the property ladder.
Statistically, taking out a mortgage works out better than renting because you can pay less per month on a property potentially. A gifted deposit can often come from inheritance, although in some situations, parents have gifted the deposit 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 the 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 a 5% deposit from your savings.
The people who benefit the most from this tend to be First-Time Buyers or Home Mover in Sheffield. It can also be helpful 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 have to provide additional proof and ID (things like donor ID or bank statements).