What Happens If A Family Member Gives Me Money Towards A Deposit On A Home?
For first-time buyers in Hackney, saving up for a deposit can be a significant obstacle when it comes to getting on the property ladder. However, that’s where a gifted deposit can come into play. More first-time homebuyers than ever before are turning to their parents for help so at Amar Mustafa - The REAL Estate Agent, I have drawn up this first-time buyer’s guide to gifted deposits so that you can understand how it works.
What Are Gifted Deposits?
First things first – gifted deposits are financial gifts used to cover part or all of your mortgage deposit given by a family member in the form of a lump sum. It is not a loan, therefore, there is no legal requirement for the homebuyer to repay it and the person who is gifting the money must have absolutely no design on becoming the owner of any part of the home being purchased. The gifter holds no stake in the property and gets no mention on the deeds or mortgage application. Put simply, gifted deposits must genuinely be a gift, and there mustn’t be any expectation of any returns being received in exchange.
Can Anyone Gift A Mortgage Deposit?
Although in theory, anybody can gift a mortgage deposit, in practice most are given to grandchildren or children by grandparents or parents. Although a friend or other relation may gift a deposit, most lenders will require more checks to be carried out, and gifters face a more rigorous burden of proof which can slow the home-purchasing process down significantly.
Are There Limits Of Gifted Deposits?
Some lenders may stipulate limits, but in many cases, there isn’t any upper limit on gifted deposits. Nevertheless, a larger sum could be subject to inheritance tax. Everybody is entitled to give away up to £3000 every year. This amount may also be carried over from the last year. Therefore, if both of your parents are still living, as much as £12,000 is able to be given as a gift with no worries about inheritance tax so long as no other financial gift has been given elsewhere in that 2-year period.
What Type of Proof Is Needed For A Gifted Deposit?
The person who is giving the gift will be asked to provide some documents. They may include:
- A gifted deposit letter.
- Proof of identification – a photographic form and two different address ID forms.
- Proof of available funds, for example, bank statements.
Do I Have To Pay Back A Gifted Deposit?
Just like loans aren’t considered to be gifts, gifted deposits can’t be loans, so a gifted deposit does not have to be paid back.
For more information about deposits, mortgages, and purchasing your first home in Hackney and surrounding areas, get in touch with me, Amar Mustafa - The REAL Estate Agent now on 020 3150 5007 or at firstname.lastname@example.org to get the advice you need.