The media are constantly reporting how difficult it has become for first time buyers to get themselves onto the property ladder. Saving for a deposit, plus all of the other costs involved when buying a property is cited as one of the biggest reasons a lot of first time buyers are struggling to buy.
Over recent times, in order to help alleviate these problems, there has been a growing trend with parents, friends and relatives gifting deposits to first time buyers to help to give them a leg up and get them their dream home. But what is a gifted deposit and how does it all work?
Put simply, a gifted deposit is a sum of money that has been given to a first time buyer purely with the aim of helping them to purchase a property. However, it isn't as simple as just agreeing to gift someone the money and then writing them a cheque;
In order for the first time buyer to obtain the mortgage they need, their lender and indeed their conveyancer will need to be told about the gift and they will require something called a gifted deposit letter. This letter will need to contain the following basic information for the transaction to be able to go ahead:
- The full name(s) of the person(s) who will be receiving gift.
- Confirmation that the gift will never need to be repaid.
- The total amount being gifted.
- Where the money has come from.
- The relationship between the person gifting the money and the recipient.
So, a great way for mum and dad to help their kids fly the nest, but are there any negatives? - Obviously the person gifting the money should be absolutely certain they can afford to do so and take into account the possibility of a fall out further down the line. Furthermore they should seek the advice of a qualified financial advisor who can give proper advice about individual circumstances, any potential tax or legal implications etc
If you are a first time buyer or a relative or friend of one and would like to know more, why not get in touch?
Until next time...