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Gifted deposit mortgages - your questions answered

According to the English Housing Survey 2006-07, about three quarters (72%) of those aged 35-44 were owner occupiers. However, by 2016-17 this had fallen to half (52%). The proportion of 35-44 year olds in the private rented sector has also increased in line with this trend, up to 29%. With would-be first time buyers finding it difficult to access the housing market there are several options which may be available to them, including gifted deposit mortgages.

What is a gifted deposit mortgage?

A gifted deposit is where a third party is giving the buyer the money for their deposit. This could be a portion of the deposit, or the whole amount, but importantly this cash must be a ‘gift’ which does not need to be repaid.

Who can provide this deposit?

This will vary between mortgage lenders – at the Ipswich, we’re able to accept deposits that have been gifted from close family members such as parents, grandparents, brothers or sisters and also from step-parents, step-siblings, step-grandparents, applicants’ children, applicants’ step-children or applicants’ adopted children.

What the benefactor needs to consider

The benefactor will be required to declare the sum of money is an unconditional and non-refundable gift, with no interest is to be charged or repayments to be made. They must be aware that they will have no rights, interests or claims in the property, will not have any registered legal charge over the property and will not reside in property now or in the future. In addition to this, at Ipswich Building Society we will require proof that the deposit monies are available in a UK based account.

If the gift exceeds £100,000 the benefactor will be required to seek Inheritance Tax Advice.

What your client needs to consider

It is essential that the person providing the deposit must agree to the declarations listed above. For applicants seeking a mortgage at 95% loan to value, with the full deposit amount being gifted, we will also require 12 months of continuous rental history.

For more information on our gifted deposit mortgages click here or call us on 0330 123 1073.

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