Home buyers who receive a gifted deposit, have been given either a portion or a full amount of the required deposit to put down for a property purchase. There must be an agreement in place that this is purely a gift and not a loan.
Gifted deposits are generally quite useful when you have the ability to afford your monthly mortgage repayments, but you are unable to afford the initial deposit (typically at least 5%). The more gifted deposit available, the better the rates that could be available to you with a mortgage lender.
Gifted deposits can also be really good if you happen to be on a lower salary and are struggling to save up for your initial deposit, even if you technically would be able to afford your monthly mortgage repayments.
As a general rule of thumb, it will be your parents who are the ones to gift you a deposit. This is not just limited to birth parents, however, as adopted parents and, depending on the mortgage lender, carers. This type of process is often nicknamed the Bank of Mum & Dad.
Some mortgage lenders will also allow potential other family members to be considered as well, if they are looking to gift you a deposit. The options will vary between mortgage lenders, so you’ll need to take care when finding the right one.
We often find that our customers aren’t actually aware that their parents are able to help them out with their mortgage goals. The truth is that most parents are more than willing to help their children to get onto the property ladder.
Many believe that taking out a mortgage and owning a property is much more prosperous than rental life, and parents will generally want to help you achieve that if they can.
Gifted deposits typically are given through inheritance, though if they have a large savings account or have released some equity from their home, they may gift this much earlier to you.
Almost all mortgage lenders will be unaccepting of a loan as a way to pay back the deposit on your home. The reason for this is because it makes mortgage lenders uncertain as to whether or not you would be able to afford both the mortgage loan and the personal loan at the same time.
Of course, a gifted deposit isn’t a loan, it’s a gift, so this isn’t likely to be an issue to a mortgage lender.
There is no maximum limit on the amount that someone can gift you towards your deposit, though in different circumstances, some mortgage lenders may want you to put down at least 5% of the property purchase price from your own savings.
This doesn’t mean you cannot use a gifted deposit, just that you also have to contribute. A gifted deposit in this instance can be used to top-up your savings to create a much larger deposit, opening you up to a better loan-to-value.
Typically those who will reap the highest reward from a gifted deposit will be first time buyers in Derby and those who are moving home in Derby.
It can also be quite useful when it is used alongside the Help to Buy Scheme, as the required 5% deposit, depending on your mortgage lender, can be paid with the help of a gifted deposit.
In almost all circumstances, mortgage lenders will want to see a gifted deposit form. You may also be asked to provide them with additional documents, such as the donors ID and maybe even their bank statements. This is typically for the sake of evidencing where the funds have come from.
Last edited 16/09/2022