A little extra help

A gifted deposit is a sum of money that is given as a deposit on a property from a third party.  Many first time buyers are lucky enough to receive their deposits from family members, house-builders and on occasion the vendors themselves in order to purchase a new home of their dreams.

However, there are pitfalls to this type of deposit.  Many mortgage lenders for example may refuse to lend to you if you have a gifted deposit. They want to see a commitment from you, showing you are able to save money for your home and therefore present yourself as a safe investment.  There are also tax laws governing the giving of money as a gift so it’s wise to be prepared for this.

Once you get round these obstacles, and if you are prepared to shop around for a mortgage, you could find a gifted deposit is the answer to your property woes.

There are a number of different gifted deposit options dependent on your situation:-

With higher property prices and most lenders accepting no less than a 5% deposit, it’s no wonder that first-time buyers are turning to family to help them to raise the necessary deposit funds. In fact, in over 50% of cases, first-time buyers had received financial help from a family member. If you think your parents, grandparents or a sibling may be able to help you raise the necessary cash to move, then this can be a great way to reach that first rung of the ladder.

Whilst many mortgage lenders will only lend to those who have raised a deposit themselves, there is a substantial amount of lenders who will, so it should be quite easy to find a ‘gifted deposit mortgage’ on the high street. The best way to start is to speak to us so that we can scour the latest deals to find you the most suitable product.

If you are a parent thinking about helping out your child with their property purchase, there are a number of ways you can do this. If you don’t have available funds in a savings account, then you might consider releasing some of the equity in your home, re-mortgaging, or taking out a personal loan. However, it’s important to know the risks involved, so to speak to us to ensure you get the right loan or re-mortgage product. A mortgage advisor will also advise you of the tax laws associated with money given as a gift. Any gifted deposit must be brought to the attention of all solicitors and lenders concerned. Never attempt to conceal a gifted deposit as it could risk your chances of acceptance and affect your credit rating.

A vendor deposit is a gifted deposit given by the builder or vendor as a discount from the true market value of a property. For example, a property is worth £150,000, a 5% deposit would be £7,500. The vendor or builder will knock this amount off the asking price and ‘give’ it to the buyer so they can use it as a deposit. This agreement needs to be put to the lender and also brought to the attention of all solicitors involved. It’s essential that the property has been valued correctly and that a mortgage valuation has also been carried out to determine the current market value of the property.

In summary, gifted deposits can be a godsend for those struggling to raise a deposit themselves. As long as you know the pitfalls and speak to a reliable mortgage advisor you should be able to find a mortgage lender willing to accept this type of deposit.

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