One of the most time-consuming and challenging parts of buying your first home is saving enough money for a deposit. Due to this, some parents and family members are now choosing to provide younger generations with some, or all, of the deposit money that they need to buy their first house.
A gifted deposit is money given to a homebuyer to buy a property, and can equate to some, or all, of their deposit. Different to loans, gifted deposits are given with the understanding that the money doesn’t need to be repaid.
Gifted deposits are commonly accepted by mortgage lenders when they’re given by family members, such as parents or grandparents. For example, Newcastle Building Society’s lending policies welcome deposits gifted from parents and other relatives, as long as there’s no repayment required and the underwriter is happy to proceed. All lenders will expect proof of deposit as part of the application.
Anyone that applies for a mortgage will need to provide proof of deposit as part of the lending process, usually as part of the supporting documents.
When using a gifted deposit, applicants will be required to provide confirmation that they received their deposit as a gift. Often, this requires signed confirmation by the donor, stating:
- What their relationship to the applicant is;
- The amount of money they wish to gift;
- That the gift is non-refundable;
- That they will hold no legal charge over the property.
The donor may also be required to provide a bank statement, as proof of where the money has come from. This is part of standard money laundering checks, and nothing to be worried about.
The amount gifted as a house deposit can be as much, or as little, as the donor chooses.
However, there is a potential financial implication when it comes to tax. If the donor passes away within seven years of the money being gifted, the home buyer may be required to pay Inheritance Tax on the gifted deposit. This however only applies if the value of the donor's estate (including the gifted deposit) is worth more than the donor's available nil rate band.
Here at Newcastle Building Society, our friendly, approachable team are experienced with processing gifted deposits as part of the mortgage application process and will be able to help you every step of the way.
For all of our useful guides and tools to help you on your journey to buying your first home, visit our first time buyers page. To compare the different types of mortgage deals that are currently available, get in touch with one of our mortgage advisers to begin your mortgage application process.
YOUR MORTGAGE WILL BE SECURED ON YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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