How to buy a home with a gifted deposit

If you’re saving for your first home and you’re lucky enough to be offered a gifted deposit you’re probably wondering if there’s anything you need to know. That’s why we’ve put this article together to explain who can give you a gifted deposit, the hoops you’ll need to jump through and the potential pitfalls too.

What is a gifted deposit?

A gifted deposit is a sum of money given to someone who is buying their own home. It’s usually given by a family member or sometimes a friend. And it’s important to note gifted deposit are just that – they’re gifted. So unlike a loan a gifted deposit will not need to be repaid. Also, the person gifting the money will not get a stake in the property.

Who can give me one?

With rising house prices and the cost of living set to soar it might be harder than ever to save for a house deposit so you’re probably feeling like a helping hand from anyone would be a huge help right now. But with gifted deposits are there any rules about who can give you one?

In theory almost anyone can gift you a deposit however most mortgage lenders are strict on who they will accept as the person gifting the money. Most lenders prefer the person gifting you the money to be an immediate relative, like a parent, grandparent or sibling. And some lenders state it must be a parent who gifts you the money. While if you plan to use a gifted deposit from a friend this could make the process slower as lenders would typically view this relationship as more complicated.

But don’t worry about finding out which lenders will accept what yourself because we're here to help. If you speak to one of our expert advisers and explain your circumstances they’ll be able to talk you through your options.

What’s a gifted deposit declaration or letter?

It’s important to know you can’t just tell your mortgage adviser or lender that you’re using a gifted deposit – you’ll need to provide a gifted deposit letter as evidence.

Your letter will need to include the following:

• The names of those giving and receiving the money
• The sum that will be given
• A statement confirming the money is a gift
• Confirmation the person gifting the money won’t get a stake in the property
• Evidence the person giving the money is financially solvent.

 

Gifted deposits and inheritance tax: What do I need to know

Have you considered inheritance tax? You may need to pay this on the amount you're given if the person gifting you the deposit dies within seven years of doing so. This will depend on your circumstances though so you may consider taking advice on this from a financial adviser.

Getting a mortgage with a gifted deposit: How we can help

Whatever stage you’re at, whether you’re ready to buy a home with a gifted deposit or you’re still considering your options, it’s a good idea to get expert advice so that you're informed about your options. Our advisers are here to answer all your questions and to help you make the right choice for you. So get in touch today!