Many aspiring homeowners are turning to family for financial assistance with deposits.
- The reliance on gifted deposits stems from rising house prices and challenges in saving.
- First-time buyers particularly benefit from family gifts to enter the housing market.
- Gifted deposits require specific documentation to be accepted by mortgage lenders.
- Potential tax implications exist if the donor dies within seven years of gifting.
In today’s housing market, as property prices soar and saving becomes challenging, many homebuyers increasingly depend on financial gifts from family members. This trend is particularly prevalent among first-time buyers who struggle to accumulate the substantial deposits required to step onto the property ladder.
For these buyers, gifted deposits offer a route to homeownership that might otherwise remain out of reach. However, ensuring these gifts are accepted by mortgage lenders involves more than simply receiving the funds. Documentation, such as a ‘gifted deposit letter’, is necessary, wherein the donor asserts the money is a gift with no expectation of repayment.
This letter, essential for the mortgage process, must include details like the amount gifted and confirmation that the donor will not have any share in the property. Furthermore, donors often need to provide identification and evidence of their funds’ origins.
The use of gifted deposits can simplify securing a mortgage by potentially lowering the loan to value ratio. Yet, the acceptance of gifted deposits is not uniform across all lenders; different institutions have varying criteria regarding who can be a donor, commonly restricting this to close relatives.
In addition to logistical considerations, there are important legal implications. If the donor passes away within seven years of giving the gift, the amount could be subject to inheritance tax, contingent on the estate’s size. Prospective homeowners are advised to consult with financial or legal advisers to navigate these complexities and ensure compliance with all requirements.
Gifted deposits are a helpful, yet complex, solution for many aspiring homeowners.
