Gifted mortgage deposit and how a gifted mortgage can help you
A mortgage deposit that is given to you as an advance loan doesn’t count as a gift. The deposit becomes a loan if you have to repay it.
Clear paper trails are essential for deposit records. Lenders and solicitors, for example, will want to verify that the funds came from a legal source. This is because of anti-money laundering regulations, and it is a legal procedure that will not be overlooked.
Unreliable evidence of your gift could cause your solicitors to delay closing the property transaction and stop your mortgage offer. It can also lead to your mortgage application being denied.
It is essential to have the appropriate evidence to show lenders that your deposit was a gift.
gifted deposit mortgages are where you receive all or a portion of the deposit. A deposit can be gifted by family members and friends. However, lenders prefer to receive gifts from family members over friends.
How to get a mortgage using a gifted deposit
These simple steps will help you ensure you approach your mortgage most professionally.
Demonstrate that your deposit is a gift
The lender will need proof that the deposit is not a loan but a gift. It can be very simple. Lenders will usually accept a signed letter or document stating that the deposit is a gift and is not a loan.
The document must clearly state that the deposit is not to be repaid and should also clarify that it is not a loan. It should also clearly state that the gift does not grant any rights to your friend or family member.
If you are still uncertain, your mortgage advisor can provide a template for you to use.
What should my deposit statement say?
The following information must be included in your gifted deposit document:
What happens if I have to repay my gifted deposit?
Your deposit must be repaid. It is not a gift. Lenders will likely reject you if you have the deposit amount loaned. Understanding that your deposit is being borrowed to you also means it counts towards your outstanding debt is important.
Lenders will calculate your current debt level when they do mortgage assessments. This could include outstanding financial arrangements and unpaid credit cards.
Your application won’t be helped if your deposit is for a loan. There may be lenders that you can still approach. It all depends on your criteria and what type of mortgage you applied for.
Your helper would have some security over the property if your deposit was a loan. This is not good news for lenders. Lenders want their funds to be secure. Lenders can be compromised by any other interested parties.
How can a gifted mortgage help you?
A first-time buyer may have a difficult time getting a mortgage. It can also be challenging to raise a deposit. Many people believe that a gift deposit from a loved one is the best way for them to make their dream of homeownership a reality. With house prices rising, and the availability of low deposit mortgages decreasing, lenders have become more cautious about how much they will lend. Many have had to put off their plans.
You will have the best chance to get a mortgage. Even if you already have begun saving, a gift might help you to get the best mortgage rates.
The use of a gifted deposit will not affect the type or availability of a mortgage. Most lenders do not have gifted deposit mortgages. You should be open about your intentions to use a gift deposit during the initial stages of applying for a mortgage. This will help you to avoid any anti-money laundering checks.
This is why mortgage lenders ask those who have gifted deposits to submit certain documentation.
Alternatives to a gifted Deposit
Parents and grandparents may be able to help their grandchildren or grandchild buys their first home if a gifted deposit is not available.
Lending a deposit
It is possible to borrow money for a deposit. If this happens to be free of interest, it will be cheaper than getting a personal loan for the same purpose.
Lenders could treat these arrangements the same way they would any formal loan, even if interest is not involved. This means that your repayments may be considered when calculating how big you can borrow. This could result in a reduction in the amount of mortgage offered to you. Some lenders might even refuse your mortgage application.
You can also become a mortgage guarantor for your offspring. A mortgage guarantor is a person who guarantees that you will pay your mortgage in the event you fall behind on payments. These loans-to-value options can be referred to as a family help mortgage by some lenders. These products require that you either save money with the lender or take a charge for your home.
Another option is to enter into a joint mortgage. This can boost a first-time buyer’s purchasing power. A lender will consider both the incomes of the child and parents when deciding how much they can afford. It is important to note that borrowing based upon multiple incomes may result in repayments that are too high for the person living in the property. Additionally, parents will have to show affordability for both properties.