A gifted deposit means you have been given money towards, or to fully cover, your deposit amount. This is NOT a loan nor does the person giving you the money have any stake or financial interest in your property. The money must be given freely, with no requirement or expectation of repayment at any time in the future.
Gifted deposits are commonly accepted by mortgage lenders when they are given by immediate family members, such as parents (often otherwise known as bank of Mum & Dad), grandparents or siblings. If the gift is from friends or other family members only a limited number of lenders may consider this as acceptable and so it would be wise to consult a mortgage advisor for their expert advice on this.
You will need to inform your mortgage lender and your solicitor that your deposit has been gifted as part of their anti-money laundering checks. Lenders and solicitors will often ask for proof of your deposit and will look at 6-12 months of bank or building society accounts to see if your deposit has been built up gradually or has come from a lump sum and will need to confirm the true source of funds. Therefore if you are offered a gifted deposit from a family member (giftor) please ensure you declare it as such and never try to hide the fact from either your lender or broker, so that they can ensure the right advice and process is followed.
Your mortgage adviser or lender can supply a gifted deposit letter template for the giftor to complete and sign to satisfy lender requirements. When gifting a deposit this could cause possible tax implications for the giftor and you should consult a tax advisor with regards to this. The lender may also request bank statements or proof of origin from the giftor as another part of their anti-money laundering checks. Do not be offended by this as all lenders are, by law, required to obtain this information.
As you can see a gifted deposit or equity, although very much welcomed, can be a minefield to negotiate and this is where a great mortgage broker and their team can be especially useful in ensuring all paperwork is completed correctly.
If you think we can help with this, or any other mortgage deposit queries, please get in touch and we will be happy to assist.