Gifted Deposit Mortgages

Updated 20th November 2021.

Gifted Deposit Mortgage Advisors.

 

Getting onto the property ladder can be tough. Firstly, prices are increasing and so are the deposit levels needed.

Secondly, it may seem virtually impossible for first-time buyers to save a deposit. However, a mortgage with a gifted deposit may be a viable solution for you with the right advice.

As such, gifted deposit mortgages are one of the most common ways first-time buyers can get onto the property ladder.

This article will outline everything you need to know about getting a mortgage with a gifted deposit.

If you have any further questions or would like to discuss your circumstances with a mortgage expert, please do not hesitate to get in touch with our team today.

Call us on 0300 124 5655 or fill out a contact form online.

Scroll down for more information and FAQ’s.

Gifted Deposit Mortgage Topics.

What is a gifted deposit mortgage?

This is when a deposit is from someone else and gifted to you. This can either be the entire amount or just a portion of your mortgage deposit.

The gifted deposit can come from family or friends.

Each mortgage lender has slightly different criteria around who they will allow a gifted deposit from. Some mortgage lenders will only allow it from close family members.

However, the source of any gifted deposit for a mortgage will be closely looked at. Anti-money laundering rules ensure that the gifted deposit must have a clear paper trail.

Your mortgage broker & solicitor will want evidence and documents to prove the money is from a legal source.

A deposit much be a gift and can never be a loan. This would not be acceptable for most lenders.

If you are unsure on anything around a gifted deposit mortgage, always speak to a mortgage broker first.

Do mortgage lenders accept gifted deposits?

Gifted deposits from family members are widely accepted by mortgage lenders. Certain mortgage lenders require the gift to be from a blood relative, others aren’t so strict. However, there are mortgage lenders who will allow a gifted deposit from anyone, these tend to be for clean credit cases.

Can you be gifted a house deposit?

Yes, family members and friends can gift you a deposit. They will also be subject to anti-money laundering checks.

That said, most mortgage lenders do prefer gifted deposits from family members, rather than friends.

However, if a mortgage deposit is from a loan, it doesn’t constitute a gift. 

Does it matter if your deposit is gifted?

Yes, the important word here is ‘gifted’; and this money isn’t a loan. Gifted deposits need to be provided on the explicit understanding that the money doesn’t need to be repaid.

The person who is gifting the deposit, must not be given any stake in the property in return for providing you the deposit.

How much of a mortgage deposit can be gifted?

For example, it is possible, but not guaranteed for the whole amount to be a gifted deposit. However, your individual circumstances will determine if this is possible.

The more complex your situation, the more this will affect which lender will be available to you.

Specialist lenders will typically want you to put in 5% of your own money towards the deposit together with the monies for the moving costs.

However, this is not the case with all specialist lenders.

Getting a full understanding of your whole circumstances will determine which options are best suited for you.

Furthermore, your mortgage expert will be able to give you tailored advice for your circumstances.

Get in touch with our team if you would like to learn more.

 

Get Started

Contact Us Button

Mortgage deposit from family.

This is the most common type of gifted deposit. For instance, many parents are now helping their children onto the property ladder with a gifted deposit for a mortgage. The change in family culture has seen more parents/grandparents choosing to help family members.

You may also see this spoken about as ” bank of mum and dad”. When property prices boomed back in the 1990’s, this led to an increase in the equity parents/grandparents had in their property. Equity is released to help the younger generation onto the property ladder. This is achieved by a standard remortgage or equity release.

Gifted deposits from distant the family member, such as uncles, aunties, or cousins, the fewer the options.

As a rule, not all lenders will accept this type of gifted deposit from those family members. Always check with your mortgage advisor beforehand.

Are gifted deposits from friends acceptable?

To begin with, these types of gifted deposit are perceived as riskier from a mortgage lenders point of view. Ordinarily, the feeling is, there is more chance of this being a loan and therefor, more susceptible to money laundering.

There are certain mortgage lenders who will accept this type of gifted deposit. The paper trail will be inspected by the lender, to determine that the gift is genuine.

With gifted deposits from friends, one thing to keep in mind is that the number of lenders will be limited, in short, this could affect the rates being offered to you.

How to get a mortgage with a gifted deposit.

The process is a quite simple one if followed in the correct way. Always speak to your mortgage advisor first before you start getting any gifted deposit.

All lenders will want some form of gifted deposit letter, some will have their own template, others will not. The information required on the letter will all be similar:

  • Name of the person gifting the deposit.
  • The gifted amount.
  • Property address.
  • Mortgage lenders name & address.
  • That the person gifting the deposit has no interest or rights to the property.
  • Stating it is a gift and not a loan.
  • Source of the deposit – i.e., savings.
  • Signed and dated by all people gifting the deposit.

*There may be other criteria dependent on the lender.

Can I use a gifted deposit and gifted equity?

Yes, some lenders will allow you to use gifted equity also known as a concessionary purchase and a gifted deposit.

The high street lenders will have more options then than the specialist lenders, at present there are a couple of specialist lenders who will allow this type of purchase.

The person gifting the equity will also need to take independent legal advice.

Another consideration will be that it is not a distressed sale, i.e. someone selling the property due to financial distress.

Documents for the gifted deposit.

Usually, the persons gifting the deposit will also need to provide some documentation to the lender and solicitor. Namely, they will be:

  • Proof of identity – passport or driving licence.
  • Bank statements showing the funds.
  • Proof of address – recent utility bill or bank statement.
  • Gifted deposit letter – stating it is a gift and not a loan.

Documents are required due to anti-money laundering regulations.

If the gift giver dies – is inheritance tax due?

When you are accepting a lump sum gift as a type of ‘early inheritance’ from a relative, there are a few things you be aware of.

If they die within seven years of providing you the gift, you may have to pay inheritance tax on it.

This is especially important if it is from an older relative such as grandparents.

Another important factor is, the gifter cannot be putting themselves into financial difficulty.

For example, if by giving you the gift, they would then qualify for certain state benefits, if this were the case there would be issued raised.

Always speak to you mortgage advisor and explain the whole situation to them.

Vendor & Landlord gifted deposits.

An example is when a landlord is selling the property to the tenants. Hence, they are already in the property and have a good relationship with the landlord, then sometimes the landlord will sell them the property below market value.

However, there are instances where a vendor wants a quick sale and will reduce the property price (discounted purchase price).

However, lenders will want to check that it is not a distressed sale and the property is worth the full market value.

Vendor gifted deposits are not common in comparison to gifted deposits.

As such, not all lenders will allow this sort of gifted deposit. There is a limit to the amount of discount accepted and the lenders will generally want you to put a certain % of the deposit money in.

Speak to your mortgage advisor who will be able to give you tailored advice for your circumstances.

House builders gifted deposit.

As a rule, this sort of gifted deposit is normally from new build builders, these can also be known as developer gifted deposits.

Generally, these are used as an incentive to generate a quick sale.

Lenders will have a limit on the % they will accept. Generally, new builds are perceived as higher risk and hence more deposit will be required.

The Help to Buy scheme means you can get a new build with 5% deposit. You can read more about the Help to Buy scheme here.

Can I use a guarantor?

Instead of a family member gifting you a deposit for a mortgage, the other option is to act as a guarantor. However, this is riskier for the person acting as the guarantor, furthermore they are responsible for any missed mortgage payments.

Another option is the family springboard mortgage. This is where a family member or friends puts money into the lenders accounts as a deposit.

Thereby, they will earn interest and the money is returned to them after 5 years. To read all about family springboard mortgage click here.

Gifted deposit for a bad credit mortgage.

With any bad credit mortgage, the lender will look at the profile of the whole case. Generally, the more complex the situation the more this will impact any mortgage application.

In short, it is possible to get a bad credit mortgage coupled with a 100% gifted deposit, but the options will be limited, and this will be reflected in the interest rate offered.

Always speak to your advisor before making any decisions. For example, we had a client who had a £10,000 hire purchase agreement, they were going to pay this off with their own funds ( which they had saved) and use a gifted deposit from parents for the deposit.

The best way would be for parent to pay off the hire purchase, wait for the credit report to update and use the £10,000 of their owns funds for a deposit.

Ordinarily the best advice is to get an updated copy of your credit, you can do so by clicking here.

Can I get a buy-to-let mortgage with a gifted deposit?

The criteria for a gifted deposit mortgage buying a buy to let is simple. Likewise, most lender require the same paperwork as residential mortgage.

Some mortgage lenders will have a restriction on the relationship between you and the gifter. For the most up to date information contact us today. To read all about buy to let mortgages click here.

Can I get a gifted deposit mortgage in Scotland?

Yes, the mortgage advisors we work with are vastly experienced in arranging gifted deposit mortgages, especially in Scotland.

Gifted deposit mortgages in Scotland follow the same principal as the rest of the UK.

To access the absolute best deal for your gifted deposit mortgage, contact us today.

Speak to a gifted deposit mortgage advisor.

Because we are specialist gifted deposit mortgage advisors; our experts can help you to find the right gifted deposit mortgage on the market to meet your specific requirements.

Most people go to their own banks mortgage advisor who declined them. or they cannot borrow what they need. However, just because one lender has declined you, do not give up.

From big high street banks and building societies to smaller, more niche lending companies, there is a lot of choice out there.

The brokers we work with are whole of market and offer completely unbiased advice – ensuring that you get the absolute best deals available.

If you are looking for mortgage advice, fill out a contact form online or call us now on 0300 124 5655

Get Started

Contact Us Button

Get Started

Contact Us Button

Please select a valid form.