What is a gifted deposit mortgage and do the lenders accept it?
Gifted deposit mortgages are now more common than ever. With the average price of a property in the UK now £226,071, it is little surprise that many First Time Buyers will look to Bank of Mum & Dad (or even Uncle) for help. Saving for a mortgage deposit by yourself is never easy.
Deposit funds for a mortgage can be gifted from any family relative, partner or even close friends are acceptable with some lenders.
Over the past few years, lenders have relaxed their criteria when it comes to accepting gifted deposits, but many lenders still require a ‘gifted deposit letter’ or gift declaration to be signed to waive the rights to any interest in the property.
What is a gifted deposit declaration?
This is an example of a typical gifted deposit declaration that a lender may ask the gift donor to sign before the lender issues the mortgage offer:
I/We confirm that the gifted deposit is an unconditional and non-refundable gift and I/we will have no rights or interest in the property whatsoever.
If the gifted deposit is from a family member and is subject to a subsequent charge or family trust arrangement where the only condition is repayment of the gift upon the sale of the property, the following declaration may also apply:
I/we confirm that the only condition is that if the property is sold I/we will require the full amount of gift to be repaid, I/we confirm that no interest is charged, I/we do not require any repayments to be made and I/we will have no other interest or claim upon the property.
We always advise applicants to seek independent legal advice with regard to deed of trust arrangements.
Which lenders will accept gifted deposits?
Many of the leading banks and building societies will accept family gifted deposits. We ask that applicants declare the gifted deposit upfront so that we can factor in this criteria with our initial research.
We need to know who is gifting the money, their relationship to you and how much money they are gifting. Lenders may also ask to see bank statements from the family member to show the funds in their account.
Author: Ben, Glow Mortgage Advisor (CeMAP, BSc Hons)
First Published: 22nd January 2018