Family gifted deposits with bad credit

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A gifted deposit refers to an amount given to you by a third party as a deposit on a property. Usually, children ask their parents to help them with  a mortgage deposit and if the gift is not expected to be returned, it is known as a gifted deposit. A lot of buyers are falling back on gifted deposit mortgages to increase the amount they can put into buying and this can increase their chances of gaining access to competitive deals. A gifted deposit is not a loan and shouldn’t be mistaken for a mortgage deposit loans loans can affect your mortgage affordability. Both parties need to sign a documentation showing that the Mortgage deposit is gifted and it will show the donor and buyer’s name, relationship between them, a statement showing the amount given while stating that there is not expectations of repayment.

The percentage of the mortgage deposit that can come as a gift depends on the requirements if the lender and other additional factors, although some can permit the while amount to come as gifted deposit. In situations where the borrower has a history of adverse credit, he night be required to make pay a part of the money from his own cash.

A Family gifted deposits is an amount of money given to a borrower by a family member to form a part or a of the deposit he requires to make to enable him purchase a property. A large proportion of first time buyers usually turn to their parents for family gifted deposits and this offers parents the opportunity to help their children purchase properties. This can also be done by distant family members but there are usually strict criteria on that. Siblings, parents and grandparents are usually allowed without much questions but when it is coming from cousin, uncle, or aunt, some lender’s may not approve it. Some of them accept it if there is a blood relation between the distant relative and the borrower while others reject it entirely. Before you accept a family gifted deposit, you should make enquiries and find out if it will be accepted.

There are some credit issues that can affect your mortgage application and they include the following: Low credit score, adverse credit overview, County court judgement, bankruptcy, debt management plans, mortgage arrears, Individual voluntary arrangements, repossession, and defaults.

Having a bad credit record and 100% gifted deposit can lower your chances of getting approved for a mortgage compared to someone with a good credit history. The truth is, no matter how big your deposit is, most lender’s are still interested in how much you contributed in it. They are less likely to approve your application if you do not contribute to the deposit because they do not have any historical proof that you can repay the loan.

What lenders need for gifted deposit

There are a number of things the lender might want to see before they can accept your family gifted deposit. The solicitor and the lender might want to see a bank statement that confirms where the money came from, proof of address and identification of the third party offering the gifted deposit. This is simply a part of the anti-money laundering checks they carry out to know whether the gift deposit was gotten from the sale of properties, savings or investments.

They would also want to see a declaration letter stating that it is a gifted deposit. The written document cinfirma that it is genuinely a gift and the third party giving the gift would not have a legal interest in the property you are buying or ask to be paid back in the future. In addition to that, you might also be required to fill some forms from the lender. It is advised that the person gifting the money seeks a legal advice so he can fully understand the implications and what he is expected to do. The donor can choose how much he wants to give as a gifted deposit , however, there are financial implications when it comes to tax. If the donor dies within seven years of gifting the money, the buyer may be required to pay inheritance tax for the gifted deposit, but this happens only when the value of the donor’sproperty and (including the gifted deposit) is more than the donors available nil rate band.

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FCA disclaimer

Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.