According to a recent government report1, our housing market is in crisis. Here is what the Prime Minister had to say in her opening statement:
“Our broken housing market is one of the greatest barriers to progress in Britain today. Whether buying or renting, the fact is that housing is increasingly unaffordable – particularly for ordinary working class people who are struggling to get by. Today the average house costs almost eight times average earnings – an all-time record.”
Despite these difficulties, more first-time buyers got onto the property ladder in 2016 than in any year since 2007, but would-be home owners now need to raise on average over £32,0002 for a deposit. Increasingly, first time buyers are having to ask for help from their families, and research suggests that over 305,000 parents helped family members onto the housing ladder in 2016, with the average value of support standing at £17,5003.
Raising a deposit for the mortgage on your home can be a difficult task, but a Gifted Deposit from your family is an effective way to raise the money you need, if you have a family member generous enough to help. At Saffron Building Society we can accept gifted deposits on our mortgages and we thought we would provide a guide which explains how they work.
What is a gifted deposit?
A gifted deposit is a sum of money given by a family member which forms all or part of a deposit when you buy a property and is non-repayable.
Things to consider when arranging a gifted deposit
Your mortgage product will be exactly the same whether or not you have a gifted deposit, but there are certain things you need to be aware of:
- The gifted deposit can be used, along with your own money, to make up the full deposit.
- The individual gifting the money will need to complete a gifted deposit letter, or a form provided by Saffron Building Society.
- The person gifting the money should be aware that they will have no legal rights to the money once the purchase is complete, and no way of recovering it.
- A gifted deposit could have inheritance tax implications. The individual supplying the gift should seek advice from a financial adviser or contact HMRC for more information. The HMRC website and phone number can be found here.
- Your mortgage product will not change because of the gifted deposit. However, if the size of your deposit increases, because of the gifted deposit, it could enable you to select a product with a lower interest rate.
- Saffron Building Society will conduct standard money laundering checks to confirm where the gifted money is coming from.
- We are unable to accept gifted deposits if the money originates from overseas.
- It is possible to borrow money from your family and repay it on the sale of the property. To do this you will need to seek legal advice as the person supplying the money will be taking a legal charge over the property.
Although buying your home can present challenges, our mortgage advisers will be able to help you with the information you need and decisions you have to make.