All you wanted to know about gifted deposit mortgages

Gifted deposit mortgages refer to mortgages given in the form of gifts. Imagine a situation wherein you need to make the mortgage deposit. Without making the deposit, you can’t get the property. In case you have a shortage of funds, you won’t be able to make the deposit and may lose the chance of getting the property. Most home buyers find themselves in this problem. A solution to this problem is the gifted deposit mortgage.

What is a gifted deposit mortgage?

A gifted deposit mortgage, as the name suggests is deposit money gifted for your use. It can either be the entire amount you need to make the mortgage or can be part of the money. Depending on your need, you can approach your family, relatives, or close friends for funds. The money they gift to you for use in the mortgage is known as the gifted deposit mortgage.

An important point to note here is that the gifted deposit is a gift, which means it does not have any strings attached to it. The amount is not a loan and need not be repaid. The person making the gift should be doing it voluntarily with no conditions attached. The person making the gift will not own part of the property or have any kind of stake in it.

Who can give the gift?

There are some rules related to gifted deposits. This depends on the lender who is doing the mortgage. Most lenders do not accept deposits from persons who are not relatives. Gifts from close family members like parents, grandparents, brothers, and sisters will pose no problem. The lender would accept. Gifts from cousins and close friends are not accepted by all lenders. Before you go ahead with your plan to get a gifted deposit mortgage, you need to talk to your lender and find out from whom the deposit would be accepted.

You need to prove to the lender that you have a gifted deposit as per the lender’s rules. This is required to be in line with laws like the money laundering rules. Lenders will ask for a gifted deposit letter from the person(s) making the deposit. Lenders may have their own template, so check in advance before getting the letter. Here is what the letter should contain:

  • The name of the person receiving the gift.
  • The name of the person giving the gift.
  • The relationship between the gift giver and receiver.
  • The amount deposited.
  • Confirmation that the amount is a gift and not a loan.
  • Confirmation that the gift giver has no stake in the property.
  • Confirmation of the source of deposit.
  • Signatures of all the parties concerned.

Getting the gifted deposit mortgage

In case you are in shortage of funds, then you can look for a close relative to gift you money for the mortgage. You can take to a gifted deposit mortgage advisor. The advisor would be an expert on mortgages and would ensure the gifting is done as per norms and completed without hassles.