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A gifted deposit is when a family member gives a home buyer some or all the money for their deposit.
Saving for a mortgage deposit can take a long time – you’ll need a chunk of the overall home value, which can be tens of thousands of pounds. A gifted deposit can help you to get on the property ladder with help from your parents or family.
Most mortgage lenders will allow you to use a gifted deposit, but they will want to see evidence that the money doesn’t need to be paid back. They will also want to know your relationship to the person who is giving the money and if they can afford to give it.
A lender will also look at the rest of your finances to understand if you can afford to repay a mortgage.
You’ll need to follow some standard rules when using a gifted deposit:
The person giving the gift must always provide a gifted deposit letter to a mortgage lender.
It needs to include:
This letter should then be signed by an independent witness and given to your solicitor. The letter is then submitted along with your mortgage application.
The gift giver will also need to provide the following personal documents to comply with anti-money laundering laws:
There are a few rules to be aware of when it comes to gifted deposits. These include:
Each lender will have their own rules around gifted deposits so it's always worth checking before applying.
If the deposit gift giver dies within seven years of the money being gifted, inheritance tax may be charged on the money. This depends on how big their estate is at the time they pass away.
You can also accept the money in instalments of £3,000 every year. That’s the limit at which you won’t pay tax on cash gifts.
Are you a first time buyer struggling to save for a deposit? Our Family Boost mortgage means your family puts 10% of the agreed property purchase price into a 3 year fixed term savings account as security instead.
The property will be all yours, and your family will get their savings back, plus interest, as long as your payments are up to date.
Find out more about the Family Boost details and conditions.