A gifted deposit can either be a portion of the full amount of the deposit that is gifted to you, with an agreement that it is not a loan and you don’t need to repay the money.
Gifted Deposits are useful when you can afford your monthly repayments but can’t afford the initial deposit. The more gifted deposit available, the better the rates you could possibly get from a lender.
This can also be helpful if you’re on a lower salary and can afford the monthly mortgage repayments but are having trouble saving your initial deposit.
Generally speaking, it is your parents who can gift you the deposit. This includes both birth and adopted parents, as well as carers (dependent on the lender). You may see this referred to online as the “bank of Mum & Dad”.
There are other potential family members who could also be considered when looking at utilising a gifted deposit. The options here vary between lenders so require a lot of care when trying to find the right mortgage lender.
We find that clients often don’t have a clue that they can actually have help with a mortgage from their parents, or don’t feel like they can go to them for help. In truth, most parents are more than happy to help their children find their footing on the property ladder.
Statistically, taking out a mortgage is more beneficial than renting, due to the potential of paying less per month. The deposit can regularly come from inheritance, although parents have been known to gift it earlier on in life if they already have a substantial amount saved or have released a certain amount of equity from their home.
The majority of lenders won’t accept a loan as a means of paying your deposit. This is because it leaves the lender uncertain 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 although there have been known lenders that insist you put in at least 5% deposit from your own funds.
Those who would benefit the most from this tend to be first time buyers and home movers. It can also be handy when in conjunction with the Help to Buy Scheme, as the required 5% deposit, depending on the lender, can be paid via gifted deposit.
For the most part, all lenders will require a gifted deposit form. Depending on the lender, you may be asked to provide additional proof and ID (things like donor ID or bank statements).