Family gifted deposit mortgages
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Family gifted deposit mortgages
Owning a home is a dream for a lot of people, but it’s out of reach for many. Despite there being no shortage of first time buyer mortgages out there, a lot of wannabe home owners are held back by the amount needed for a deposit. Even if you’re only planning to buy a small, relatively ‘cheap’ home, the deposit can still be substantial and impossible to save. This is why a number of first time buyers jump at the chance to receive financial support from family members; it can be the difference between owning a home and continuing to rent. If that’s your plan, you’ll need a family gifted deposit mortgage.
At Everest Mortgages, we’ll guide you through the process of getting a family gifted deposit mortgage, whilst ensuring the process is as simple, straightforward and speedy as possible.
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Standard mortgages vs. family gifted deposit mortgages
Whether you’re looking for a first time buyer mortgage, a flexible rate mortgage or a low deposit mortgage, you’ll need to save up a deposit. This tends to be between 5% and 20% of the property value, though some lenders accept more or less. Considering the price of properties at the moment, saving a deposit is no easy feat, even for relatively high earners. That’s why a growing number of buyers are using family gifted deposits.
How does a family gifted deposit mortgage work?
A family gifted deposit mortgage allows you to use a financial gift from a family member – more often than not, this is parents or grandparents – to cover all or part of your property deposit, making it easier to get on the property ladder. They’re commonly used to make property ownership possible for first time buyers who might otherwise struggle to save a big enough deposit.
Whereas loans need to be paid back, gifted deposits don’t need to be, but you will need to prove this to the lender. They’ll want to know that the money is a genuine gift, that it will not be reclaimed and that the gift-giver has no legal claim to the property. The majority of people who get a family gifted deposit mortgage are first time buyers, but existing homeowners can also benefit.
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The benefits of a family gifted deposit mortgage
There are a number of advantages that come with getting a family gifted deposit mortgage, especially if you’re a first time buyer, ranging from reducing the amount you need to save to unlocking better mortgage deals.
You’ll need a lower deposit
Receiving a financial gift from a family member can reduce the amount you need to save yourself, making it easier to turn your dream of buying a property into a reality.
You’ll have access to better mortgage rates
When lenders see that you have a larger deposit, they’re more likely to give you a better rate. This can help to reduce monthly repayments, compared to if you were buying with a smaller deposit.
You’ll get onto the property ladder faster
With financial support from family, you’ll find it easier to purchase a home, rather than having to wait years to save a larger deposit by yourself. With property prices rising, this can feel increasingly out of reach.
There’s no repayment obligations
Unlike loans, a genuine gift doesn’t need to be repaid, giving you financial freedom and flexibility.
As you might expect, and is the case with all first time buyer mortgages, there are a few things to keep in mind. For example, lenders often require a formal gift letter confirming that the money is a gift, and some lenders might restrict the size of the deposit that can be gifted. This is why it’s important to work with an expert mortgage broker, who can ensure everything is in order.
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3 ideal candidates for a family gifted deposit mortgage
First time buyers
More often than not, it’s first time buyers that are interested in family gifted deposit mortgages. With saving for a deposit out of reach for a lot of people, these mortgages are an effective way to overcome the biggest hurdle when it comes to breaking into the housing market.
Buyers with limited savings
Even if you’ve tried your hardest and you’ve started to build up a savings pot, it might not be enough to buy your ideal home. A financial gift from family can help you to reach the deposit threshold for better mortgage rates, whilst also enabling you to access a wider range of properties.
Young professionals
Family gifted deposit mortgages can be a lifesaver for young professionals living in high property price areas. They ease the burden of trying to save a large deposit for an expensive property, whilst also trying to keep up with the rising cost of living and renting.
By combining your own savings with a family gift, you may qualify for mortgages that would otherwise be out of reach.
How family gifted deposit mortgages help first time buyers
For many first time buyers, saving enough for a deposit is the biggest barrier to getting on the property ladder. Even with low deposit mortgages and no deposit mortgages available, property ownership isn’t always within reach. But, family gifted deposit mortgages can make this process significantly easier.
By allowing parents, grandparents or other close relatives to contribute to the deposit, you can access larger mortgages and more competitive interest rates. Plus, by combining your personal savings with a family gift, you can consider homes that better suit your needs.
The importance of working with a mortgage broker
Family gifted deposit mortgages can come with specific lender requirements and documentation rules, which is why working its best to work as a qualified mortgage broker. This is where we come in.
At Everest Mortgages, we’re here to help you to find lenders who accept gifted deposits, and we ensure you have all the necessary documentation – including gift letters – ready for your application. We’ll guide you through the process, helping you to secure the best possible mortgage for you.
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FAQs
Frequently asked questions
Can any family member provide a gift?
Yes, most can. Lenders usually accept gifts from parents, grandparents, siblings or other close relatives, but they might ask for proof of your relationship to one another.
Does the gift need to be paid back?
No, as long as the gift letter confirms that it’s not repayable, the lender treats it as part of your deposit without any repayment obligations.
How much can I receive as a gifted deposit?
The amount varies by lender, but most allow a significant portion of your total deposit to be covered by the gift.
Do I still need my own savings?
Most lenders prefer you to contribute some of your own savings, as this shows financial responsibility and helps with mortgage approval, but it’s not always a requirement.