When you need a little help …. to get onto the property ladder

06 Dec 2019

As it becomes increasingly more expensive to buy a first home, one option is to use a gifted deposit.  It is quite common for children to ask their parents for help with a mortgage deposit and it is often given without expectation of it being returned - this is called a gifted deposit. 
What is a gifted deposit?

A gifted deposit is a sum of money that is given by someone, often a family member, forming all or part of the required deposit to buy a first home.  Friends can also gift money but not all lenders find this acceptable.  A gifted deposit is often the easiest way to help your children to buy a home.
Who can gift money to purchase a property?

Some lenders will only allow a family member to gift money.  Always check with your broker or lender what their requirements are in this respect. If it is a friend who is offering a gifted deposit it is essential to check that the lender will accept a friend gifting money.  Some lenders will not accept this.  This needs to be discussed with your broker / lender at the outset to avoid any delays or withdrawal of an offer at a later stage.
What do I need to do to use a gifted deposit as part of my mortgage?

Your legal advisor will need to see a bank statement or something to confirm where the gifted money is coming from along with some identification of the person giving the gift and proof of address.  It is likely that your lender will also require sight of the same documentation.  You should check your lender’s requirements when you are ready to submit your mortgage application.  Some lenders have their own Gifted Deposit Letter which the person gifting the funds will need to complete.
The giver will need to provide funds to their solicitor who, in turn, will send them to the legal advisors for the buyers.  The giver can transfer the funds directly to the buyers solicitors but certain steps will need to be taken to identify them in accordance with current money laundering legislation.
Does the giver and receiver need separate legal advice?

It is important that both parties receive independent legal advice to ensure that their objectives are met and that their interests are protected.  The person gifting the money should seek separate, independent legal advice and understand that they will have no interest in the property and no right to get their money back.  A gifted deposit is not a loan.  This ensures that there is no impact on the buyers mortgage affordability.
What are the tax implications?

You may have to pay inheritance tax on the gift if the giver dies within seven years of handing over the money.  It is important that the giver seeks independent tax advice.

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