By: Jack Williams

Gifted deposits can be a great way to help family members purchase a home, but many people are unfamiliar with how they work. If you're considering using a gifted deposit to buy a property, it's important to understand the ins and outs of this process. In this article, we'll explain everything you need to know about gifted deposits, and how they work.

What is a gifted deposit?

A gifted deposit is simply a sum of money given to a homebuyer as a gift, rather than a loan. The gift can come from a family member or friend, and is intended to help with the purchase of a property. The gifted deposit can be used as part or all of the required deposit for a mortgage. For example, if a family member gifts you enough money to up your deposit from 5% to 10%, you may be able borrow more and get a lower interest rate. 

How do gifted deposits work?

When using a gifted deposit to buy a property, there are a few steps you'll need to follow:

1. Get ID from the person gifting. The first step is to identify who will be providing the gift to your mortgage broker and lender. This person must be able to provide proof of their income and identity. Examples of proof of identification are a passport or a driving license. 

2. Provide declaration of the gift to your lender: The person providing the gift will need to write a letter confirming that the money is a gift and not a loan that needs to be repaid. The letter should include the date of the gift, the amount of the gift, and the relationship between the giver and the recipient. Dependent on your lender, this may be a letter or a template form they will provide you to fill out. 

3. Get proof of funds. Your lender and solicitor will need to check where the funds have come from, whether that is the sale of a house or other asset, savings, or inheritance. 
   
    

Benefits of gifted deposits

There are several benefits to using a gifted deposit when buying a property, including:

1. Less to save: A gifted deposit can be a great way to help family members who are struggling to save enough for a deposit. By receiving a gift from a family member, they can get a head start on the road to homeownership.

2. No need to repay: Because a gifted deposit is a gift and not a loan, there is no need to repay it. This can be a great relief for those who are struggling with debt or other financial obligations.

3. Can increase your chances of getting a mortgage: A gifted deposit can also help increase your chances of getting a mortgage, as it reduces the amount you need to borrow. This can make you a more attractive candidate for a mortgage, as you'll be seen as less of a risk to the lender.

Gifted deposits can be a great way to help family members purchase a property. By following the steps outlined above, and understanding the benefits, you can use a gifted deposit to help you achieve your dream of homeownership. If you have any further questions, or need advice on your mortgage options, don't hesitate to get in touch with Blossomfield Mortgages. Our team of experts is here to help!