Please note I have a new Article dated 29/07/2013 on Gifted Deposits please click on the below link
Today I concentrate on the subject of ‘family gifted deposits’ and how they can be used to help you buy your property.
Getting assistance towards your deposit for a property has become increasingly popular. This can be put down to the rise in UK property prices and the lack of affordable housing around larger cities.
There has also been regulatory capital constraints placed on banks due to the excesses of lending pre credit crunch – with the vast majority of lenders insisting on a deposit of at least ten percent before they will consider lending to you.
One way to break the circle and get a property foothold is to turn to close family for a gift to help you get on the property ladder. However even this process has been tightened in recent times as the lenders place a great deal of emphasis on the demonstration that you have been able to up the save up the deposit by your own fruition as it demonstrates that you can budget and have surplus deposable income. That said, at Niche Advice, we can help you built the case for this transaction to the lenders. And, based on our vast experience ensure the ‘gift’ is suitably documented so there is no ambiguity, and is acceptable for lending purposes. This typically involves constructing a letter in the correct manner to contain the relevant information and details.
What members of the family can make a gifted deposit for a home?
Generally the gift must come from a close relative this means it needs to come from a parent or sibling i.e. mother, father brother or sister.
We also are able to include deposits from extended family but the rules behind this are quiet rigid and restrictive. Gifted deposits from friends are not allowed.
The gift must be a ‘genuine gift’ requiring confirmation that is not to be repaid at any point or indeed a charge placed on the property.
Which lenders accept ‘gifted deposits’?
Each lender has its own set of rules and criteria when it comes to gifted deposits and in this article I have concentrated on ‘family gifted deposits’ but there are other schemes such as developer and vendor gifted deposits.
For Family gifted deposits my advice is to be honest and disclose the true beneficiary and the amount they are contributing and on what terms. Concealing facts is not the way to go with lenders. They expect you to work on a full disclosure basis and will more times that not turn down your application should they find out details to the contrary either during in the mortgage or subsequent legal processes. By being upfront you will know whether the lender is prepared to lend from the outset rather than waste valuable time and may be loose your property of choice.
Be warned, large gifts of money, particularly from abroad, will be scrutinized from a money laundering perspective to stop criminals hiding their money in the lucrative UK property market.
Common questions in regards to gifted deposits.
How much can a gifted deposit be of the actual deposit amount?
It all depends on the lender some lenders insist that it cannot be more than 50% of the entire deposit amount, and possibly more if the applicants do not how permanent UK rights to reside. Others are happy with the full amount coming from a gift as long as the underwriters are happy with the rest of at the application and are confident that the applicant has still got affordability to repay the mortgage.
Can Niche Advice and help us with drafting a gifted deposit letter?
The answer to your question is ‘yes’ however this is only done as part of the full application process. Each lender requires something specific and we have a library of requirements.
My uncle wants to help me by my place and is willing to give some money for the deposit how can I get a mortgage?
Lenders now see family gifted deposits as a potential risk hence have put in place a set of underwriting rules one of them is that the family gifted deposits must normally come from direct family members often being parents. However we do have a solution for this type of gifted deposit, I would suggest you calling us to discuss this further with us.
At Niche Advice we specialise in dealing with mortgages that are partly funded by a gifted deposits and how expertise in dealing with this matter. We will ensure that the documentation is positioned to a lender in a very precise and professional manner to ensure it satisfies their requirements.
For more information on our range of mortgages and products and services please call us on 020 7993 2044 all alternatively complete the enquiry form which can be seen on the right-hand side of this page.
Payam Azadi is a partner at Niche Advice Ltd who are Independent Financial and Mortgage Advisers in London.