When it comes to purchasing a property, you’ll need to put down a deposit with the lender. Oftentimes, when it comes to First Time Buyers in Birmingham, the homebuyer cannot afford the whole deposit themselves. This is where someone known to the homebuyer steps in with a gift of either the full amount or a portion of the deposit, along with an agreement that they don’t need to repay the funds.
It’s said that taking out a mortgage is more beneficial than renting, due to the potential of paying less money per month to the lender than you would for rent. A Gifted Deposit is commonly used when you can afford the monthly mortgage repayments but isn’t able to afford the initial deposit. The higher the gifted amount, the higher the likelihood of being opened up to better rates from a mortgage lender.
We mostly find it is your parents (both birth and adopted) who are able to gift your deposit. This is often referred to online as the “Bank of Mum & Dad”. Depending on the lender you may be able to receive a Gifted Deposit from other family members such as Aunties & Uncles, however, this requires a lot of care when trying to find the ideal mortgage lender.
When we speak to our clients, it often becomes apparent that either their parents aren’t even aware of their current mortgage situation or the homebuyer doesn’t feel like they can ask them for help. In reality, most parents are more than happy to assist with their children’s property-owning dreams, wanting to ensure they have a safe and steady boost onto the property ladder.
Your deposit can come from inheritance, although there have been cases in which parents have been known to gift it earlier on in their life if they have already saved enough. Alternatively, they may have released a certain amount of equity from their property and are able to provide a Gifted Deposit with that way.
Due to the uncertainty that you would have enough disposable income to pay back both the loan and mortgage simultaneously, most lenders won’t accept a loan as a means of paying your deposit.
Some lenders may insist that you put down at least 5% deposit from your own funds, however usually there is no maximum limit on the amount you can receive as a Gifted Deposit.
Gifted Deposits are mostly beneficial for First-Time Buyers and Home-Movers. It can also be a handy tool to use in conjunction with the Help-to-Buy Scheme, as depending on the lender, the required 5% deposit can be paid via Gifted Deposit.
Usually, all lenders will require a Gifted Deposit form. You may be asked to provide further proof and ID (things like donor ID or bank statements) depending on the lender that your Mortgage Advisor in Birmingham feels you should use.