Gifted Deposit FAQs

Gifted Deposit Mortgage Advice in Hull

As experienced mortgage brokers in Hull, we have come to appreciate the difficulties first time home buyers in the area face when trying to get onto the property ladder. One of the most significant challenges that buyers encounter is raising the required deposit amount.

We have observed that in many cases, parents, grandparents, and occasionally even close friends are willing to assist their loved ones to achieve their homeownership dreams. Such supporters may offer a gift or a partial amount of the deposit to help the buyer secure a mortgage and purchase a property. In this article, we aim to explore in detail the concept of gifted deposits, how they work, and their benefits to first time buyers in Hull.

What is a gifted deposit? 

A gifted deposit is a sum of money given by parents, grandparents, or friends to a homebuyer to use towards the deposit required to obtain a mortgage and purchase a property. This gift can be either a portion of the required deposit or the entire amount.

It’s important to note that a gifted deposit is not a loan and the person giving the money has no expectation of repayment. This means that the money is given with the understanding that it doesn’t need to be paid back at any point in the future.

Gifted deposits are a popular way for first time buyers to get onto the property ladder, as they can help to bridge the gap between what a buyer has saved and what they need for their deposit. They can also make it easier for buyers to access better interest rates, as a larger deposit can often mean more favourable mortgage terms.

How can gifted deposits help out?  

First time buyers in Hull who are struggling to save up for the initial deposit can benefit greatly from gifted deposits. These deposits are particularly useful for those who have the financial capacity to cover their mortgage repayments, but find it difficult to save up for the deposit.

Many people in this situation find that they have larger outgoings, such as rental payments, home energy bills, and essential expenses, which means that they don’t have any money left to put towards saving for a deposit. Receiving a gifted deposit can help to overcome this challenge, allowing buyers to gain access to better interest rates during their mortgage process, especially if the gifted amount is above the minimum 5-10% deposit requirement.

Who can gift the deposit?  

As we’ve previously mentioned, it’s common for parents or carers to provide gifted deposits to help homebuyers with their deposit requirements. This concept is often referred to as the “Bank of Mum & Dad,” which can also include adoptive parents.

However, it’s worth noting that in some cases, other family members or friends may also be able to provide gifted deposits. Whether or not this is possible will depend on the policies of the specific mortgage lender that the buyer is working with. Therefore, it’s important for buyers to speak with a mortgage advisor in Hull before seeking a gifted deposit from any family member or friend, to ensure that they understand the lender’s specific requirements.

By speaking with a mortgage advisor in Hull, buyers can gain valuable insights into the mortgage process and receive guidance on how to navigate any potential challenges or obstacles. This can help buyers to make informed decisions about their deposit requirements and overall mortgage strategy, leading to a smoother, more successful homebuying experience.

Do your parents know you need help?  

It’s not uncommon for us to hear from customers who are unaware that their parents can assist with their mortgage. That’s why we strive to educate and inform more people about this option, so that more individuals can have the opportunity to step onto the property ladder.

In most cases, parents are more than willing to help their children secure a home of their own, allowing them to live comfortably rather than struggling in a rental property. Depending on the location, taking out a mortgage may even be more cost-effective per month than renting, although this will vary depending on various factors.

Gifted deposits can come from a variety of sources, such as inheritance, but parents may also choose to gift funds much earlier if they have saved up enough or have released equity from their own property. By providing this assistance, parents can help their children to overcome one of the biggest barriers to homeownership – the initial deposit – and allow them to build equity in their own property rather than contributing to their landlord’s wealth.

Gifted Deposit vs Loans  

Some mortgage lenders out there won’t accept loans as a means of paying off your deposit. It will be often related to the lender not being so sure if you can afford to pay back both simultaneously. 

Is there a maximum or minimum gifted amount?  

There are no limits to the amount that can be gifted to a home buyer, it’s worth remembering that some lenders will want you to have a minimum of 5% from your own savings. The more you can afford to put down, perhaps combining savings and gifts, you’ll open yourself up to better deals.  

Who could benefit from a gifted deposit?  

First time buyers and home movers in Hull usually benefit significantly from a gifted deposit as it can cover the initial 5% deposit required. It’s worth noting, however, that the policies of the lender may affect this.

What proof is required?  

Kindly ask your donor to complete a gifted deposit form, confirming that the funds provided are indeed a gift and not a loan. In addition to this, they will need to provide supporting documentation, such as identification, proof of address, and bank statements.

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Last Edited 13/03/2023