A gifted deposit is a financial contribution made by a family member to help with the deposit on a home purchase. This can be especially helpful for first time buyers who can manage monthly mortgage payments but lack the necessary funds.
For those who have the option, it’s well worth exploring.
Gifted deposit requirements
The process of gifting a deposit comes with specific requirements to ensure you can use it properly. Typically, a letter must be signed between the family member and the homebuyer. This becomes a legal document that confirms that the money is a gift and doesn’t need to be paid back.
- Lenders may have their own requirements, but a standard letter should include:
- Proof of address
- Proof of identity
- Declaration of the relationship with the applicant
- The exact sum of money being gifted
- Confirmation that the donor doesn’t expect the money to be returned
The donor may also need to provide a bank statement to verify the source of the money, which is to safeguard against money laundering.
How much money can be gifted?
The amount of money that can be gifted is flexible and can be tailored to individual circumstances. The only caveat is that if the family member passes away within seven years of gifting the money, inheritance tax may apply.
Figuring out your personal borrowing power doesn’t have to be a mystery. By using our borrowing power calculator, you can work out how much you could borrow based on the size of your deposit.
How does a gifted deposit affect your mortgage?
In most cases, a gifted deposit won’t impact your affordability, as you won’t need to pay it back. If the donor is not a direct family member, they may take it into account, but for the most part, a gifted deposit won’t affect your mortgage, only improve your chances of getting one.
Speak to an adviser today
While gifted deposits are an excellent opportunity for first time buyers, it’s important to still follow proper procedures to avoid legal or financial implications. If you have questions or need advice about how to navigate the world of gifted deposits, one of our expert advisers is ready to assist!
Get in touch with us today to ensure a smooth and secure homebuying process.
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