When it comes to purchasing a property, one of the most important starting points is saving for your deposit. We often see with first time buyers in Birmingham, that affording the entire deposit can be quite a difficult task. This is where someone is able to gift you either the full amount or a portion of the deposit. There needs to be an agreement that this is purely a gift and not a loan you have to pay back.
Taking out a mortgage is often seen as a more beneficial route than renting a property from a landlord or council. This can be for many reasons, the most appealing being that your monthly payments could be a lot less than you would be paying for a rental property per month. Gifted Deposits are used if you can afford the monthly repayments but are struggling to afford the initial deposit. The higher the amount of deposit that is gifted, the better the rates you are going to open yourself up to.
It’s generally seen that your parents (both birth and adopted) are the ones to gift the deposit. The term used online and by those in the industry is “Bank of Mum & Dad”. Some lenders will possibly allow deposits to be gifted from other family members such as Aunties & Uncles, though this requires a lot of care from a mortgage advisor when you are looking to find the most ideal mortgage lender.
We often find when discussing options with customers, that either their parents may not even be aware of their current mortgage situation, or they don’t feel like they can ask their parents for help. The truth is, most parents will be more than happy to help their kids out in securing a home for themselves, their family and their future.
Inheritance can be a part of this, with some parents opting to gift it early if they have enough saved. We have also had cases where equity release has been a contribution towards a gifted deposit.
Lenders are not fond of people taking out loans for a deposit, as this is an additional financial commitment that could possibly hinder your mortgage repayments. That’s not to say no lender will allow it, but it’s very hard to come by.
Some lenders will not allow for a mortgage unless 5% of the minimum required deposit is from your own funds. Usually though, there is not a limit on the amount you can be gifted.
Gifted Deposits are mostly of benefit to a first time buyer in Birmingham or a home mover in Birmingham. It can also be a helpful tool to use alongside the Help to Buy Scheme in Birmingham, as depending on the lender you end up with, the required 5% deposit can be paid via Gifted Deposit.
Generally speaking, all lenders will require a Gifted Deposit form. You may be asked to provide additional proof and ID (things like donor ID or bank statements). This all depends on the lender that your Mortgage Advisor in Birmingham feels is right for you.