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Gifted Deposits

Saving up for a new home can be a challenge, so a gifted deposit can massively help you when you are buying your first home. This guide will help by outlining the ins and outs of a gifted deposit.

What Is a Gifted Deposit?

A gifted deposit is a lump sum of money that is given to a homebuyer to help them buy a property. The gift does not need to be repaid and can be used towards the deposit for a mortgage.

Who can gift a deposit for a mortgage?

The specifics of who can gift a deposit for a mortgage can vary depending on the lender, although anyone in theory can give a gift for a deposit. Some examples include:

  • A family member such as a parent, grandparent, or sibling
  • A close friend
  • An employer

How does a gifted deposit work?

With a gifted deposit, the borrower needs to find someone willing to gift them the deposit money, and once they have there is some paperwork to ensure that it is all legal.

The process varies by lender, although a general process of how a gifted deposit works is:

  • Agree with your donor how much they are going to gift you towards your deposit
  • Add this to your savings to make up the full amount for your home purchase
  • When agreeing on a mortgage, you will need to provide a gifted deposit letter to show that the deposit is a gift and not borrowed
  • Once the gifted deposit has been confirmed and accepted by the lender, you can use it as part of the property purchase

It is important to note that you will still need to meet the lender’s affordability criteria and have enough funds to cover additional costs

What should be included in a gifted deposit letter?

The gifted deposit letter should have the following included within it:

  • Your name and address
  • The full name and address of the person providing the gift
  • Proof the donor is financially stable and unlikely to face bankruptcy
  • The relationship between you both
  • The gift amount and date it was made
  • Confirmation that it is a non-repayable gift

Are there any UK tax implications for receiving a gifted deposit

If the person providing the gift were to pass away within seven years of making the gift, then it could be subject to inheritance tax. This will only apply if the estate (including the gift) is worth more than £325,000, but you should seek professional advice before entering into this agreement.

Alternatives to a gifted deposit

There are several alternatives to a gifted deposit, some of them include:

  • Lifetime or Help to Buy ISA
  • Guarantor Mortgage
  • Family Assist Mortgage
  • Shared Ownership
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