Despite Brexit uncertainty and a preceding period of relative stagnation, house prices rose at the end of 2019. That’s according to the latest figures from Nationwide, which showed values standing at 1.4% higher in December than at the start of the year. The report also revealed that the average UK house price was £215,282 – so it’s no surprise that many first-time buyers struggle to find the spare cash to put aside for even a 5% deposit.
That’s where family members are often choosing to plug the gap. Those who are already on the property ladder or who have managed to accumulate significant savings, may be in a better position to offer a helping hand by providing a deposit as a gift. The following is intended as a brief overview, but if you would like further legal guidance on how to gift a house deposit, always seek the advice of qualified property conveyancing specialists. Anthony Stockton Solicitors can provide up-to-date advice should you find yourself in this situation.
Check with your mortgage provider
A gifted deposit is a sum of money given on the understanding that it will not be paid back. It is usually provided by a family member – such as a parent, sibling or even grandparent. However, not all mortgage lenders will accept gifted deposits, so it’s important to do your research and check first. Some banks and building societies will, but not if the person making the gift is a friend or is not an immediate family member. Be sure to ask questions or read the small print.
The most important thing is that there is no expectation it will need to be paid back. If it is given as a loan, some lenders may not allow it at all or else add the monthly repayments to the calculations they use to assess your outgoings (in which case the total amount they’re prepared to lend you may be significantly reduced).
Seek a written declaration
A lender may ask for a written declaration that the deposit is a gift and may also ask for proof that the generous donor will have no stake or equity in the property.
Meanwhile, because of anti-money laundering regulations and the need to be vigilant against fraud, a reputable property conveyancing specialist will also require the benefactor to submit proof of identity, as well as confirming where the funds have come from.
Other factors to consider include the possibility of inheritance tax. If your benefactor dies within seven years of giving the gift, you may be liable for inheritance tax, although only if the estate is worth more than £325,000. Seek professional advice on this matter so that you know exactly what to expect.
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