A gifted deposit can be either the full amount or a portion of the deposit that is gifted to you, with an agreement that you don’t need to repay the money.
Gifted Deposits come in handy when you have enough money for your monthly repayments but can’t afford the initial deposit. Having more gifted deposit available may also open you up to better rates from a lender.
It can also help if you’re on a lower salary and can afford the monthly mortgage repayments but are unable to save your initial deposit.
Predominantly it is your parents who can gift you the deposit. This can be both birth and adopted parents. You may see this online as the “bank of Mum & Dad”. There are potential alternative family members who could also be considered when looking at utilising a gifted deposit. This is very much dependent on individual lenders so would require care when trying to find the right mortgage lender.
We often find that clients aren’t aware that their parents can help with their mortgage, or don’t feel like they can ask them to. The reality is that most parents are more than happy to help their children, wanting them to get on the property ladder.
Statistically, taking out a mortgage is better than renting, due to you being able to potentially pay less per month. The deposit can often come from inheritance, although parents have been known to gift it earlier on in life if they already have enough saved or have released a certain amount of equity from their own property.
Most lenders won’t accept a loan as a means of paying your deposit. This is down to the uncertainty that you’d have enough disposable income to pay back both the loan and the mortgage simultaneously.
There is no maximum limit on the amount of gift you can receive although I know of at least one lender that insists you put in at least 5% deposit from your own funds.
The people who benefit the most from this tend to be First Time Buyers and Home Movers. It can also be useful when in conjunction with the Help to Buy Scheme, as the required 5% deposit, depending on the lender, can be paid via gifted deposit.
Generally speaking, all lenders will require a gifted deposit form. Depending on the lender, you may be asked to provide further proof and ID (things like donor ID or bank statements).