You only have to pick up a newspaper nowadays to read young people’s struggles in buying their first home. With house prices rocketing and modest salary increases, it can be troublesome for some aspiring homeowners. It’s no wonder that many young buyers now are in the fortunate position of their parents giving them a gift deposit for house purchases. 80% of young people have had help from their parents to buy their first homes.
Unfortunately, is it not as simple as your parents simply transferring you the funds and off you go to buy your dream house. You all must stay on the right side of the law and ensure that you follow the following guidelines.
What Is A Gifted Deposit?
A deposit is required to purchase a property, which is used to secure a mortgage offer with the lender. A gifted deposit means you have been given money to contribute to or fully cover your house deposit. Interestingly, using a gifted deposit can help to increase your eligibility for a mortgage.
What Are The Rules Surrounding Gifted Deposits?
Whoever is gifting the deposit to you must be clear on the value and extent of their gift. It’s important to know that mortgage lenders prefer it if a gifted deposit has come from a family member rather than anyone else. This process is to ensure that no fraud or money laundering has occurred.
What Is A Gifted Deposit Letter?
When a first-time buyer is using a gifted deposit, there must be tangible proof that the amount is gifted, and there is no expectation of payback. This element can be as simple as being written down in a formal letter. They must specifically mention that it is a gift if so. Otherwise, it could have been expected to be paid back as a loan. You will need to have the letter witnessed, and you should ask a lawyer to look over it.
Being able to receive a gifted deposit is great, but you must make sure that you do it the right way. By following the proper steps, you can avoid any hiccups, delays or errors in the house buying process.
If you are thinking about buying your home with a gifted deposit, contact Bowsers today. We can help to ensure that your gifted deposit is documented the correct way, reducing the risk of delaying your move.
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