Gifted Deposit Mortgages
Are you looking to use a gifted deposit for your mortgage? Get expert advice from a specialist mortgage broker.
Firstly, are you using 'Gifted funds' to fund part or all of your deposit?
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If you’ve been lucky enough to have been given a sum of money to put towards a house, this is known as a gifted deposit. Whilst this may seem quite a straightforward scenario, lenders do have certain requirements as to who can give that money.
Here, we look at getting a mortgage with this type of deposit and the rules surrounding them. Additionally, we identify which lenders will consider your application and, finally, we outline how to evidence where or who your equity is coming from.
Can you get a mortgage with a gifted deposit?
Absolutely. Being gifted funds increases your equity and is, therefore, a great way to improve your loan-to-value ratio (LTV). As you need to borrow less, your monthly repayments usually go down, and the interest rate charged could be lower.
You can potentially secure a lower rate as, by improving your LTV, more lenders will perceive you as an eligible candidate. For that reason, they are not only more likely to accept your mortgage application, but they are also more likely to extend you better terms.
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What are the rules around this?
Each mortgage provider has a different approach as to how they view gifted deposits, but there are typically a few general requirements.
A gifted deposit is only deemed as a gift if no repayment of the funds is required.
Lenders are generally uncompromising on this. If the ‘gift’ does have to be repaid, your outgoings are higher. That’s crucial because mortgage lenders need to consider all your outgoings under an affordability assessment to determine how much to lend to you.
Types of gifted deposit
Given these rules, it’s important to know which type of gift you are hoping to utilise for your application.
This is the most commonly accepted type – particularly if your funds are coming from a parent, grandparent or sibling. Some lenders may be happy to accept money from more distant relatives like uncles and aunts, while others require financial gifts to come from blood relations.
Usually associated with new builds, builders of new developments often offer gifted deposits as an incentive to purchase their properties. Like with vendor deposits, lenders like you to put in some of your own cash too – again to minimise their risk.
In all likelihood, you will often have to put in your own funds anyway. Builder deposits rarely meet the 10% deposit requirement that the majority of lenders use.
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How to get a mortgage with a gifted deposit
Mortgage applications can be complicated processes. Here are some steps to get you started on the right foot.
Evidence a gifted deposit
Given that lenders want to ensure that your funds are definitely a gift and not a loan, they require documentation to prove this. Each lender will have its own specific requirements for this documentation.
The majority of the time, it will mean providing a signed letter (by both parties) with:
- The donor’s name
- The donor’s relationship to the buyer
- The value of the gift
- Confirmation that the gift does not have to be repaid
- Confirmation that the third party has no interest in the property
- The document will need to be signed by both parties.
Lenders will likely want to see how the donor acquired the funds too to prevent money laundering. The majority of the time that means looking at bank statements, payslips, or evidence of a proof of sale of an asset.
Check your credit score
Even if your deposit means you now have a low LTV ratio, it’s still a good idea to check your credit reports. Downloading them before your application means you can be sure of anything that may affect your eligibility as an applicant. Any adverse issues won’t automatically preclude you from getting a mortgage, but some lenders may be more willing to accept your application despite your past credit issues.
Talk with a broker used to complex deposit sources
A broker will ensure your gifted deposit makes your application as powerful as possible, helping you secure the lowest rates. When it comes to gifted funds, they’ll likely only recommend providers who accept your entire deposit. In doing so, they can help you borrow the maximum amount you need, while keeping the interest rate charged the best it can be.
As a result, they could save you money over the term of your mortgage, while also supporting you to complete your application as well. You’re more likely to be accepted the first time, making the whole process far less stressful.
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Which lenders will consider your application?
There’s a wide range of mortgage providers who accept different types of deposit sources. Here are a number of lenders who could currently consider your application – though these are subject to change.
- Gifts from immediate family - The Mortgage Lender, Leek Building Society, United Trust Bank
- Deposits not from immediate family - Natwest, Cambridge Building Society, Norton Home Loans
- Vendor gifted deposits - Melton Building Society, United Trust Bank, Bath Building Society
- Builder deposit - Metro Bank, Suffolk Building Society, Together
- Landlord deposit - Swansea Building Society, Harpenden Building Society, Nationwide Building Society
- From an unnamed occupant - Progressive Building Society, Gatehouse Bank, Stafford Railway Building Society
Get matched with a broker experienced in gifted deposit mortgages
Maximising your deposit is one of the best ways to minimise the amount you borrow and secure a mortgage with the lowest interest rate possible. However, as not all providers accept all forms or sources of deposit, it’s crucial to make an application to a lender who does accept yours.
A broker is your best chance of pinpointing those lenders. Not only that, a broker from our network will be able to identify the lenders who will extend a mortgage with the best terms for you.
Our free, no-obligation matching service will connect you with the most appropriate broker. Call us on 0808 189 2301 or enquire with us today so we can put you in touch with a specialist.
Speak to an expert about gifted deposits
If a provider accepts all of your deposit, it increases your equity, lowers how much you need to borrow, and ultimately reduces your LTV.
With a lower LTV, you gain access to more mortgage products – potentially helping you secure a lower rate. It means you have a wider selection from which to choose, increasing your ability to pick a product that is best for your situation. That could mean lower monthly payments, a longer mortgage term, or both.
Key takeaways from this guide
Not all gifted deposits are accepted by lenders:Whether your mortgage is approved may depend on who gifted your deposit and under what circumstances.
You should speak to a broker if your deposit was gifted:The last thing you want is to be declined for a mortgage because the lender you approached doesn’t accept your deposit source. A mortgage broker can help you avoid this pitfall by matching you with a lender who will view you favourably based on the type of deposit you have.
We can match you with the right broker:There are mortgage brokers who specialise in helping customers with non-standard deposit types, and their expertise could be the difference between rejection and approval. We offer a free broker-matching service that can pair you with an advisor based on your needs, circumstances and deposit type.
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