Due to the rising house prices in the UK, most first-time buyers rely on gifted deposits to purchase a residential property. Some parents and relatives help family members to get on the property ladder. The majority of property purchasers use the gift of cash to support their home purchases.
Purchasing with Gift
A gifted deposit refers to the financial help provided to the aspiring homebuyer in support of the property purchase. However, purchasing with a gifted deposit is not as simple as money being transferred to your account as a gift to purchase a home. It requires the person to prove the gift to avoid any financial claims in the future.
Gifted Deposit Declaration
Gifted deposits are given with the intention that the money does not need to be repaid or in return for a share in the property. A gifted deposit declaration outlines that the money is a gift and the party giving the money does not have beneficial interest or right to the property.
How Much Can You Gift For a Property?
The gifted amount for the property purchase can be as much as the donor chooses. Usually, the mortgage lender will require at least a 5% deposit. With a bigger deposit, the aspiring homebuyer will be able to secure a favourable mortgage deal with affordable monthly payments. For instance, the buyer paying a 25% deposit can access better deals with cheaper monthly payments.
Purchasing a Property with Gifted Deposits
Here is what you need to do if you are buying a house with a gifted deposit:
Alert Your Solicitor
As soon as you are offered a gifted deposit for house buying, contact and inform your solicitor about the deposit being provided by the third party. The solicitor will request a letter completed and signed by the parties gifting the money.
The said letter must be in a specific format and a copy of it should be sent to the conveyancing solicitor. Also, report to the mortgage lender that the residence will be purchased with the aid of the gift.
Provide Evidence of the Gift
As soon as the buyer informs the solicitor and lender about the gift, they will be required to prove the gift by submitting written consent from the third party. The letter will outline that the party providing the money has no legal interest in the property.
Also, they have not given this amount as a loan and do not expect repayment. Besides the written consent, the homebuyer shall also submit proof of identity, bank statements, or other sufficient evidence.
Inform the Lender
Once you have received the deposit and the written consent, contact the lender to inform them about the third-party payment. The buyer will get a response within a week or so, then, the transaction can proceed accordingly.
In a Nutshell
A gifted deposit is usually given by parents, grandparents, siblings, and immediate relatives. Upon receipt of the offer, inform the solicitor and the mortgage lender about the gift and provide evidence in the form of a signed Gifted Deposit Letter to proceed with the transaction further.