Deposits often play a decisive role in finalizing a borrower’s decision especially in the case of first-time buyers, mortgage down payments are often highly important and worrisome factors. Mortgage deposit gifts reduce this burden to a great extent, making the process of getting a mortgage a lot easier. If you are facing a financial crunch while getting a mortgage for your property, a mortgage deposit gift from your family members can be a great relief. On the other hand, if any of your family members need help in making the down payment, you can gift them a mortgage deposit.

What is a gifted deposit?

As the name suggests, gifted deposit refer to the money gifted to a homebuyer towards their mortgage deposit. This money can cover a part of or the complete deposit. As more and more homebuyers are facing difficulty purchasing a house on a mortgage, mortgage deposit gifts are getting increasingly popular, especially among first-time buyers.

These gifts are often given by parents and grandparents to their children and grandchildren respectively. They are also common between siblings and other relatives who wish to help their relatives purchase their properties with ease.

It is important to note that mortgage deposit gifts are gifts and not loans. They are not taken for the purpose of repaying them. Hence, make sure you send or receive these gifts with a “no strings attached” approach.

Who can give a mortgage deposit gift?

Anyone willing to help a homebuyer to get a good mortgage deal can give a mortgage deposit gift. From friends to immediate family members to distant relatives, anyone can give a mortgage deposit gift to anyone.

However, most mortgage lenders prefer mortgage deposit gifts given by an immediate family member. This increases their assurance about the exchange being safe and legitimate. Many lenders have clauses in their contracts that specify the people eligible for mortgage deposit gifts.

While some lenders allow gifts from siblings, partners, and distant relatives, others only allow gifts from parents or immediate family members.

Although such scenarios are fewer, it is important to note that most lenders are against accepting gifts from the people who are also selling the property. Always speak to mortgage advisor who would guide on this.

Rules on buying a house with a mortgage deposit gift.

There are no objective or standard rules for buying a house on a mortgage deposit gift. The rules vary from one lender to another. Every lender has their own criteria and qualification standards to be met by the borrowers or the ones gifting them deposits.

However, here are a few important rules regarding mortgage deposit gifts that are common for most lenders:

Borrowers need to officially confirm that the deposit is a gift and not a loan
Borrowers need to confirm that the individual gifting the deposit does not have a stake or legal right to the property they are purchasing
Borrowers need to confirm that the individual gifting the deposit is a credible and trustworthy source

Most mortgage lenders look at gifts and conventional loan deposits from two completely different lenses. Before your mortgage application is processed, the lender may ask the person gifting you the deposit to give a written confirmation about the financial aid being a gift and not a loan.

Many lenders ask for a gifted deposit letter as a confirmation about the gift you receive towards your mortgage deposit. A few small lenders may also ask for a solicitors letter to ensure complete legitimacy before the application is processed. Always speak with local Mortgage broker to get the further advised.

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