Stepping onto, or progressing up the property ladder can present significant financial challenges for many house buyers. When buying a property, a mortgage is required together with a sum of money to form a deposit. Saving for a deposit can be difficult especially if a large amount is needed.

Family financial help?

There are a number of ways that family members might be able to provide invaluable financial assistance. Parental help could play a crucial part for many aspiring first-time buyers’ hoping to purchase their first property. Many new and even existing borrowers with a mortgage are now increasingly relying on a gift of cash to help build their deposit.

What is a gifted deposit?

A gifted deposit is a sum of money or equity given by a family member, friend or a third party that forms part or all of the buyer’s deposit on a property. Gifted deposits can become complicated in terms of who the borrower is allowed to accept money from and the proof that is required to be given to the mortgage lender.

Gifted deposits – some key points

  • A gifted deposit can be used in conjunction with the borrowers own savings or any associated help to buy scheme.
  • Different lenders have contrasting rules dealing with gifted deposits, including who can give the prospective home buyers the money.
  • Gifted deposits need to be viewed as a non-returnable gift and not a loan. This is due to the fact that any borrowing may have an impact on mortgage affordability.
  • The person gifting the money will also need to be aware of, and prepared to supply, evidence of where the money has come from, which may be personal bank statements, as well as going through the same ID checks as the client.
  • The gifter should seek legal advice and discuss their options to ensure they understand that they will have no interest in the property, and no right to get their money back.

Consider a Trust deed

A Trust deed can be a valuable aid to help provide financial stability and security. It is becoming increasingly important for the borrowers to protect themselves, and the money that has been gifted to them, in the event that a relationship breaks down.

Seek advice

There are many issues to be aware of when dealing with gifted deposits – these will vary from lender to lender. We would be happy to provide advice on all aspects of conveyancing matters including gifted deposits.  No matter how much a potential borrower is able to save there are many gifted deposit options available – these will however depend upon individual circumstances.

For more information or advice on the topics above, please don’t hesitate to contact us