A gifted deposit is the name given if someone were to bequeath unto you either a portion of or the full amount of the deposit. This has to come with an agreement between the two parties that this is not to be paid back as a loan.
Gifted deposits are very beneficial for instances where perhaps you are financially capable enough to afford your monthly mortgage repayments but are struggling to find the means to afford the initial deposit, be that because of a lower salary or otherwise.
Depending on the amount you are gifted, you may open yourself up to potential better rates from the mortgage lenders, as the more that goes down initially, the less you’re having to pay back overall.
For the most part we find that it is an applicants’ parents who are able to gift you the deposit. This applies to both natural-born and adopted parents, being referred to across the mortgage world as the “Bank of Mum & Dad”.
Depending on the lender that you go with, you may also be able to receive a gifted deposit from another family member, maybe even from a friend. Finding the right lender who would accept this would require care and is where a mortgage advisor can help.
Sometimes, if the person helping you is aged 55 or over, they may have the potential option of gifting you a deposit by utilising Equity Release in Halifax.
It often becomes apparent that customers don’t always realise that their parents have the ability to help with their mortgage. In other cases they may not believe that their parents would be willing to help, so don’t ask them.
What we actually find, is that the majority of parents are always willing to provide their children with financial support if they can, wanting to help them find a means of owning their dream home that they one day might start their own family in.
Taking out a mortgage, to many people, is a much preferred option to living in a rental property. This is because you may potentially be able to pay less money to your mortgage than you would’ve with rent.
With this comes a point mentioned earlier, wherein the more you are gifted, the less you are borrowing and the less you have to pay back overall. If you’re paying less back over a longer term, your monthly payments will be greatly reduced.
The deposit that you are gifted can sometimes come from inheritance, although there have been instances where parents have gifted it to their children earlier on in life, especially if they have already saved enough or have released any equity.
Pretty much all lenders won’t accept a loan as a way for you to pay off your deposit. This is because they won’t have the confidence that you would be able to afford payments for both the loan and the mortgage at the same time.
You are not limited in the amount that someone will be able to gift you, though there are some lenders out there that insist on applicants having at least 5% from their own funds.
The types of applicants who benefit the most from having a gifted deposit are First Time Buyers in Halifax and Home Movers in Halifax.
Gifted deposits can also be incredibly helpful when used alongside the Help to Buy Scheme, as depending on the lender, the 5% required deposit for the scheme can be paid via gift.
As a rule, all lenders will require you to fill out a gifted deposit form. Some lenders will also want you to provide additional proof and ID (things like donor ID or bank statements).