Securing enough money for a mortgage deposit can be tough. With monthly expenses stretched to the limit, saving enough every month can be an uphill struggle. Reading up on mortgage advice, you might think that a gifted deposit is one way to solve your struggles. However, this type of deposit could spell trouble for your mortgage application further down the line.
In this guide, we will look at gifted deposit mortgages and gifted equity mortgages to help determine if this is a viable route for borrowers. We’ll also help you to understand how to make a gifted deposit work for you.
A gifted deposit is when a direct family member gives you the money for your deposit. This could be a parent, a grandparent or a sibling. Many lenders will understand that deposits can be difficult to save and will therefore accept that some of your deposit may come as a gift from a family member.
The type of relative you can accept money from varies by lender. While some will accept a gift from a grandparent, others will not. Fewer still will accept a gifted deposit from a friend or other acquaintance.
The lender’s main concern is that the individual could make a claim towards the property at a later date. After all, they may have invested a significant sum in the property. And if your relationship changes, they may wish to get this money back. You can read more about gifted deposits here.
Gifted equity is a different matter entirely. In this situation, the gift is the difference between the value of the property and the mortgage secured on it. This could come from family members, home builders, property developers or even landlords. They offer to sell a property for lower than market value and retain the difference.
There are very few lenders that offer this type of mortgage. Lenders don’t want additional third parties involved as it can complicate the process if they need to repossess the property. If you are late with mortgage payments and the home is repossessed, the person with equity in your home will complicate the process.
Lenders don’t want properties on their books that they may not be able to easily sell at a later date. The motivation of the person offering the undervalued property would also be questioned. Lenders do everything they can to limit their risk, and gifted equity is an unnecessary risk for them to take.
If you are interested in exploring options for a gifted deposit or want to learn if you could take advantage of a gifted equity scheme, contact Niche Mortgage Info. We offer guides and support on all areas of mortgages, including first time buyers.