Although you have worked hard to save money for a deposit on a property to purchase, it seems like you are just not getting there.
Your friends and relatives may offer to help you by giving you some money.
This financial assistance can be very helpful, but it can also hurt the mortgage process.
This blog will cover everything you need to know about gifted deposit mortgages.
What is a gifted deposit?
Gifted deposits are money that someone has given you by a relative or friend. This money can be used to buy a house.
They may give you the whole amount, or they might only contribute a little to get you closer.
This is the most important aspect of these deposits. The money is, as the name implies, a gift. This means that the recipient cannot expect to repay it. In other words, it’s not a loan.
This type of financial assistance is growing in popularity as house prices continue to rise. It has been a lifeline for many people who would otherwise have been unable to get onto the property ladder.
Do you have any rules about whom it can come from?
You can generally get money from anyone to put towards a deposit. Lenders may be reluctant to approve your mortgage if the money is not from a family member.
They may not be accepted by some high-street lenders, no matter who gave the money. Before applying to a lender, make sure you know if you will be accepted.
A specialist mortgage advisor can help you to understand your options. They are more open to working with complex situations and are more flexible than other lenders.
How can you increase your chances of being accepted?
It is crucial that you prove to lenders and other providers that this money is not a loan. You can do this by sending a gift deposit letter. This may seem complicated but it is quite simple.
You will only need to get a letter from the person confirming that this is not a loan and that you are not required to make any repayments.
They will also need to emphasize that they are aware they have no legal ties with the house being purchased.
This type of letter gives lenders the assurance they need to move on to the next step of the application process.
The individual who gave the money must also prove their identity to the lender. Other documents are required. These documents include:
Photo identification
These statements are used to prove or show the current address.
Bank statements that show where the money was taken to make the deposit.
What are some alternatives to buying a house?
You can also get financial support from your family and friends to increase your chances of owning a house.
Another option is to get a lifetime ISA. The government will offer a bonus to anyone who opens an account and saves money. This is a great way to save money for a home, and it doesn’t involve your family members.
A guarantor is another option. A guarantor is someone who will make your payments if you default on your loan. This gives lenders some extra security and may allow them to be more flexible with their criteria. This could help increase your chances of being accepted.
