A gifted deposit is a financial contribution from a third party towards a deposit on another person's property. It is vital that this gift is declared to the lender if the purchaser is taking out a mortgage on the property. The lender will take the gifted deposit into consideration when making the mortgage offer.
Your solicitor will need proof of funds demonstrating where the money has come from. This is in order to comply with money laundering regulations. Proof of funds can be evidenced through sending relevant documentation e.g. a bank statement.
Your solicitor will also require notice of the gift in writing, declaring how much it is and whether it has to be repaid. If there is a proposed lender, your solicitor will send on this information to your lender for them to make a decision. Your lender will be concerned if the money must be repaid, as this will constitute as a loan and not a gift. Consequently, in the event that the third party becomes bankrupt, they may request that the money is returned. This would result in a loss suffered by the lender.
A concessionary purchase is where a property is purchased at an undervalue. This can also be viewed as a gift, with the amount of reduction in the purchase price being in effect "gifted". This type of transaction most typically occurs on a sale between family members, but can also apply in landlord and tenant transactions. The lender will always need to be informed and an indemnity policy will be required to cover the shortfall in the event that an issue arises. Your solicitor will also conduct a bankruptcy search on the vendor to ensure that there is no record of insolvency.
In most circumstances, a gifted deposit does not pose an issue when purchasing a property as it most frequently occurs when a parent/guardian aims to assist their child in purchasing a property. It is however, vital to declare the gift regardless of the size. If declaration of the gift occurs after the mortgage offer has been issued, then the lender may amend their mortgage offer or in some circumstances, withdraw it refusing to proceed.
