Gifted Deposit Mortgage

Is there a limit on how much can be gifted?

No, there’s no limit on how much can be gifted. A gift could be as little as £1,000 or as high as £150,000 if the donor is willing to do that.

Do you have to pay tax on a gifted deposit?

No, there’s no tax as the money has been gifted. However, if the person were to die within a certain timeframe, it could be that the donation may be subject to Inheritance Tax. It’s best to speak to an accountant or a tax advisor with regards to that.

What will happen if a gifted deposit is not declared?

It’s important to make your advisor aware if there is an element of gifted deposit. When the solicitor completes their money laundering checks, they’ll go back to the lender to confirm that they are happy with it.

If they’re unaware of the gift, it could potentially cause delays. It’s best to declare where the deposit is coming from at the outset.

How do solicitors check the source of funds?

Each solicitor has anti-money laundering checks to complete. Typically, they will want to see three to six months’ bank statements to satisfy these requirements. There could be further checks if the solicitor feels they are needed.

How many bank statements do I need for a gifted deposit?

Typically for the mortgage application, we would just require a gifted deposit letter. The solicitor would then complete their anti-money laundering checks on behalf of the mortgage lender. Sometimes they require three to six months’ bank statements from the donor.

What is the alternative to gifted deposits?

There’s not really an alternative as such, but you might consider a loan. However, that doesn’t really work as it’s taken into account as part of the affordability. It also means that you would have an additional cost to pay on top of the mortgage.

There would additionally be a smaller lender pool to choose from, as many lenders won’t accept a deposit from a loan rather than a gift.

What are the pros and cons of a gifted deposit?

The advantage is that you’re able to put a larger deposit down. That could bring your mortgage repayments down and even get you a cheaper interest rate.

I don’t really see a downside, unless you’re the donor and you’ve got quite a lot of children! It could cost you a lot to give the same to each child. But there’s no real downside to having a gifted deposit.

What else do we need to know about gifted deposits?

I think we’ve covered most of this, but if you speak to a broker they can guide you in the right direction in terms of criteria and the best option for you.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

For specialist tax advice, please refer to an accountant or tax specialist.