A gifted deposit is a sum of money given to a first time buyer in Hull by a family member or close friend. As the name suggests, this is not a loan but a gift, given with the intent that it does not need to be repaid. Nowadays, gifted deposits are a beneficial way for those struggling to save up for a 5% deposit to get on the property ladder.
How Does A Gifted Deposit Work?
A gifted deposit involves a family member or close friend providing the funds needed for a deposit on a property purchase. Here’s how the process typically works:
- Leave the Funds in the Donor’s Account – If you are using gifted funds towards your deposit, you are best to leave these in the donor’s account and transfer them directly from that account to the solicitor when required. If they transfer the funds into your account you will need to provide more evidential documents to show the original source of the money.
- Agreement and Documentation – The family member or friend agrees to give a specific amount of money for the whole or part of the deposit required. Both parties sign a formal document confirming that the money is a gift, not a loan and that they do not own any share in the property. This documentation, including the signed form, is then provided to the lender to verify the gift.
- Application and Approval – The borrower applies for a mortgage and discloses the gifted deposit as part of the application. The lender reviews the application along with the documentation of the gifted deposit. If the borrower meets the lender’s criteria and the gift is properly documented,the mortgage is usually approved.
- Purchase and Completion – The gifted deposit is used toward the property purchase. Legal processes ensure that the deposit is properly accounted for in the transaction, and once the purchase is finalised, ownership of the property is transferred to the first time buyer in Hull.
If you have any questions, we are more than happy to assist you. For a more in-depth discussion regarding gifted deposit mortgages, it is advisable to speak with a mortgage broker in Hull. We can help ensure that all parties involved fully understand their responsibilities and obligations related to gifted deposits.
What is a gifted deposit letter?
Mortgage lenders will want an explanation of where the money is coming from. A gifted deposit letter will contain a full list of key details and declarations that prove the overall intention and source of funds are legitimate. The ‘key details’ will include things like:
- Donor and Recipient’s Details
- The Relationship Between Given and Donor
- Amount Given
- Purpose
- Declaration of Gift
- Property Disinterest
- Date and Signature
- Bank Statements.
Are there limits on how much a gifted deposit can amount?
There is no limit to the overall lump sum you can give or use as a gifted deposit.
Can multiple people give gifted deposits?
Yes, multiple people can gift deposits. It’s not uncommon at all for families to get together and pool their money towards funding a property for someone they have in common. Each donor requires a deposit letter as outlined above, as well as their bank statements in many cases.
Date Last Edited: 06/18/2024
