Published 20 December 2013 · Last reviewed 27 November 2022 · Older article — see current rates
Reading up on a subject on the internet is helpful but can fall short on delivery, for instance, one of their biggest searches on our website is ‘gifted deposits’ for mortgages. Invariably applicants digest this and then on their own try and make it work for them – only to call us partway through the mortgage process for us to unravel the mess they have got themselves in.
Schemes of this nature are complex and professional advice should always be sought to ensure the case is positioned in the most favorable way to the lender otherwise time, money and loss of your dream home can happen.
Council tenants combining their Right-to-Buy discount with a parental gift will find our Right-to-Buy mortgage broker guide covers the deposit-stacking criteria.
Gifted deposits – the gift of money
These could come from direct family member friends or associates.
A good number of lenders understand that deposits are often difficult to raise entirely from the applicant’s own resources. They, therefore, will accept an olive branch from immediate families such as Mother, Father, Brother, and Sister. Some may even accept a gift from Grandparents but they would be in the minority.
There are a couple of lenders that will let you accept gifts from unrelated people but extra documentation and rationale may be needed to reassure the lenders about the type of transaction.
The lender’s key concern is the fact that the person lending the money should not have a claim towards a property at a later stage so often they will ask for a gifted letter of deposit to be drawn up by the person making the gift to state they waive all their rights.
Where the gift comes from an estate still in probate, executor loans may bridge the timing gap.
If you transact a ‘gifted deposit’ mortgage via Niche Advice we will provide all the necessary information and templates from our extensive library.
Gifted Equity – i.e. the difference between the value of the property and any mortgage or loan secured on it
This situation could arise when family members, home builders, property developers, and existing landlords offer the opportunity to purchase a property under its true value.
The gift of equity from ‘family members’ treads a similar path to the ‘gifted deposits’ described above, the main difference is fewer lenders offer mortgages for this type of arrangement.
Incentives from home builders, property developers, and landlords are less clear cut. Generally, lenders are nervous of an unrelated third party offering property undervalue and question the validity of the bargain. It is fair to say that if the incentive seems too good to be true it normally is, and what lenders do not want on their books is a property that cannot be sold at the price they were expecting just in case the mortgage goes into default, and as such, lenders offer limit incentives to 5%-10% to guard against such eventualities.
Again at Niche Advice, we have documentation and experience to talk and walk you through the best-case scenario for your individual predicament.
For more information on gifting equity or gifting deposits please click on the below button.