Gifted Deposits

It is not unusual in this day and age for parents eager to see their offspring flee the nest to offer an incentive by way of a gift of funds towards their deposit. However, gifted deposits are not as straightforward as most people think :-

Mortgage Company

What many people do not appreciate is that mortgage companies need to be made aware that some, or indeed possibly all, of the deposit is not coming from the applicants’ own resources. This means that the deposit provider could claim an interest in the property. It is important therefore to disclose that the deposit is coming from a third party when making the mortgage application.

Purchaser’s Solicitor

The purchaser’s solicitor needs to be made aware of where all deposit funds are coming from. If there is to be a gift, they will need to contact the deposit provider to obtain:

• confirmation from them that the deposit is indeed a gift and not a loan;
• the source of the deposit funds and bank statements from the deposit provider (to comply with the Money Laundering Regulations);
• Identification documents; and
• Whether the deposit provider does in fact require an interest in the property.

The sooner this information is provided the quicker the solicitor can carry out all the necessary checks. They can also obtain confirmation from the mortgage company that they are happy with the situation.

Gifted Deposit Provider

From the deposit provider’s point of view, they should definitely consider getting independent legal advice on the merits of gifting large sums of money.  A gift is a gift and cannot be claimed back in the future. So, whilst it may seem a very good idea to help your child get a foot on the property ladder, serious thought should be given to the basis on which the funds are being provided:-

1. Would you want to protect the lump sum against future events e.g. death or divorce of your child?
2. Would you expect repayment of your contribution at any time in the future?
3. Are there any conditions that you want to be attached to the gift?

Providing as much information to your solicitor about your deposit funds as early as possible will ensure there are no last minute hitches which might hold up your purchase from completing.

For further information or guidance, please do not hesitate to contact our offices on 01270 625478 where we will be happy to help. To arrange an appointment you can complete this form for a call back. Alternatively you can visit our Residential Conveyancing services page here.