Who can make a gifted deposit?
Every mortgage lender has its own rules, and they will stipulate who is allowed to gift a deposit. Mortgage lenders will usually allow parents, grandparents and siblings to gift deposit money. More distant relatives such as uncles and aunts are rarely allowed.
It is very important to check a mortgage lender’s rules before you give or accept a gifted deposit towards a house.
Please also note that some mortgage companies will not release funds unless the donor (the person giving the gift) has received independent legal advice.
How should you protect a gifted deposit?
If you have received a gifted deposit, it is important to protect it. None of us can predict life’s twists and turns so it is advisable to consider all eventualities.
If you are buying a house with a partner and it will be partially funded with your parents’ money (or another family member’s money), it is worth thinking about what will happen if your relationship breaks down or one of you dies.
Our solicitors can draw up a Declaration of Trust to ensure you and your partner are clear how your property will be divided if the unexpected happens. This can provide both you and the donor of the gifted deposit with peace of mind.
What are the tax implications for gifted deposits?
Gifted deposits are not taxable unless the donor dies within 7 years of making the gift. In this case the money could be subject to Inheritance Tax.
Inheritance Tax will only be payable if the donor’s estate is worth over £325,000 including the deposit.
It is advisable for the donor to seek independent legal advice before they make the gift. This is likely to be a requirement of the mortgage lender anyway.