Everything you need to know about Deposits in 2024.
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You can be gifted a deposit in order to buy a home. This is increasingly common in the current housing market. More and more people are needing to get a gifted deposit from family and friends in order to get on the property ladder.
On top of this, more and more first time buyers are also requiring schemes such as Joint Borrower Sole Proprietor to be able to borrow the amount they need to buy that home they want in the first place.
You can give someone money to buy a house. Typically you will be required to sign something to say it is a gift and not a loan. You may also be required to provide evidence of the build up of the gifted funds. At Albion Forest we do not require this and generally only need a gifted deposit letter unless the lender asks for further evidence.
However, a solicitor may need to see further proof of deposit in order to satisfy the various anti money laundering measures that are in place.
A gift is one of the most common types of mortgage deposit. Due to ever increasing house prices many people are needing to get a gift in order to secure a mortgage. Therefore you will find that most lenders will happily accept a gifted deposit rather than, or as well as, savings. Generally you only require a gifted deposit letter for most high street lenders.
You must declare a gifted deposit, even if they money has already been transferred to your bank account. Not declaring a gifted deposit to the lender could constitute fraud and could not only result in your application getting declined if you are found out, but also potential fines or even prison sentences.
Most lenders will want to know the source of your deposit, and will often ask for evidence of where it has come from. The most common sources of deposit are:
Each will have different requirements of how you prove where the funds came from, but usually this involves providing bank statements. The exception to this would be inheritance which may involve a letter from a solicitor or something similar.
Lenders generally require a letter from the person providing the gift stating that it is a gift and not a loan. They also usually have a statement that no money is required to be repaid. For the majority of lenders this is sufficient for proving deposit funds are a gift and not a loan.
Some, however, may also ask for bank statements from the person gifting the funds, to evidence where the money came from.
This will depend on the lender, and your loan to value (LTV). Many lenders will require evidence of deposit funds for a home purchase, whether a first time buyer or not. However, a remortgage will not have any evidence requirements usually.
Some lenders will require bank statements showing the savings, or a gifted deposit letter. Not all lenders have this requirement though, if you are in doubt about what you will need, speak to your mortgage broker who will be able to tell you the lender’s requirements.
From a mortgage perspective you will need anything from no bank statements, to 3 or even 6 months bank statements. This will depend on the lender. However, your solicitor will be required to do more in depth anti-money laundering checks. This could require seeing bank statements from the person gifting your deposit, even if the lender doesn’t require them.
Failing to declare a gifted deposit may result in the lender declining your application. They may also make a note of this to a system other lenders can use to see that you attempted this. Other consequences could include fines, or even potential prison sentences.
Ultimately not declaring a gifted deposit is a huge mistake, as in most cases lenders would not have any issues with it.
You can certainly get a gifted deposit on your mortgage. Just make sure you tell your mortgage broker, solicitor and lender that it’s a gift!