Buying A House Using A Gifted Deposit – What You Need To Know
As property prices continue to rise, saving for a deposit is often one of the biggest challenges for buyers. That’s why many buyers, especially first-time buyers, receive a financial helping hand from family members or loved ones. This financial helping hand is commonly known as a gifted deposit.
If you’re considering using gifted funds to support your property purchase, or you are a family member of a buyer and you are considering gifting a sum of money to assist with a property purchase, it is important that you understand what a gifted deposit is and the information that a solicitor/mortgage lender will require. Being prepared as early as possible can help ensure that the purchase transaction progresses smoothly.
What is a gifted deposit?
A gifted deposit is a gift of money given to a buyer to put towards their deposit. A gifted deposit differs from a loan as there is no expectation of repayment. Gifted deposits are typically provided by close family members, e.g. parents or grandparents, but can sometimes be gifts from other relatives or, in some cases, friends.
As a gifted deposit forms part of a buyer’s equity in a property, solicitors and mortgage lenders are required to verify the gift for anti-money laundering purposes, but also to protect a buyer’s interest.
What will my solicitor require from my giftor?
If you are buying a house using a gifted deposit, your conveyancer will require certain information. Your solicitor will require your giftor(s) name and an explanation as to their relationship to you. They will also require contact details for your giftor(s) so that they can run anti-money laundering checks.
The documents required from your giftor(s) for anti-money laundering checks are likely to be: –
- one form of photo identification, e.g., a passport or a driving licence
- two forms of address identification e.g. a council tax bill or utility bill
- bank statements showing the gifted funds held by your giftor(s)
- An explanation as to how the gifted funds have accumulated.
What are my mortgage lender’s requirements likely to be?
Your solicitor is required to notify your mortgage lender when deposit funds are made up of gifted funds. It is likely that your lender will require a gifted deposit declaration to be completed and signed by your giftor(s), and that a clear bankruptcy search result is obtained by your solicitor for all giftors. Please note that a bankruptcy search will not affect your giftor(s) credit rating in any way.
What information should a gifted deposit declaration contain?
Most mortgage lenders have their own gifted deposit declaration that your solicitor can provide. A gifted deposit declaration should include the following: –
- The total amount that your giftor is gifting
- The full name(s) of the giftor(s)
- The giftor(s) relationship to the buyer
- The property address
- Confirmation that the funds constitute an outright gift and are not repayable
- Confirmation that your giftor(s) will not occupy the property.
Can my giftor(s) be overseas resident(s)?
Some mortgage lenders will accept gifted deposits from a family member who resides overseas. Please note that gifted funds from an overseas resident may involve additional checks as international fund transfers are closely monitored for anti-money laundering purposes. Your solicitor/lender are also likely to require translated copies of a giftor(s) bank statements.
Important things to consider to ensure a smooth process
When using gifted funds during the property purchase process, there are a number of things you can do to help the process run as smoothly as possible:
- Inform your solicitor and mortgage broker about your gifted deposit as early as possible
- Ensure that your giftor(s) are ready with ID and bank statements
- Keep evidence of the gifted funds’ journey into the deposit
Hopefully, this guide sheds some light on gifted deposits, but remember your solicitor and mortgage broker are there to help. If you have further questions or wish to seek expert legal advice from a conveyancer you can trust, don’t hesitate to get in touch with the residential property team at GA Solicitors.
Our team of specialist conveyancing solicitors in Plymouth have years of experience advising on all aspects of buying or selling a property and can support you both locally and beyond. The team has won a range of awards, attesting to the quality of service we provide. Call 01752 203500 or email enquiries@GAsolicitors.com to discuss your requirements.
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