When you are looking at buying your first ever home, it can be challenging trying to figure out the cost of everything. From the cost of the property, mortgage arrangement fees and deposit size, to name but a few, there’s a lot to consider.
The latter is the primary focus of our topic here. For any purchase and subsequent mortgage, you will need to put down a deposit on the property. Be it a gifted deposit, your savings or a Help to Buy Scheme, there are many different ways to make up that deposit.
You can use any of the methods to achieve this, so long as you are able to evidence where that deposit came from, as though it will only be a portion of the much larger property purchase price, it will still be a considerable amount of money being put down.
We find that gifted deposits are typically the most popular forms of deposit for a first time buyer in Manchester. If you’re buying a property for the first time, this may be crucial in helping you to own your own home.
A gifted deposit is a lump sum of funds that is given to you as a gift, allowing you to cover all of or make up some of your mortgage deposit. Gifted deposits are not loans, they’re strictly gifts that will not be repaid at a later date.
Your donors will need to sign an agreement confirming that this is to be the case, before you can proceed.
Gifted deposits are useful when you’re struggling to save up for the deposit on your mortgage. You may be able to afford the monthly repayments with your income, but saving up a bulk of income for a deposit can be quite tricky.
If you receive a gifted deposit from somebody, combining it with some of your savings can help to raise your deposit even further, possibly allowing you to gain much better interest rates.
This minimum required deposit is typically around 5%, though some lenders may want to see 10-15%. If this has been gifted and you can make up a further 5% of your own, you could be going to the mortgage lender with a 15-20% deposit, which would be incredibly beneficial.
Lower interest rates are useful if you happen to be working on a lower salary.
Generally speaking it will be the mortgage applicant’s parents that gift the deposit. This can be both birth and adopted parents, as well as carers and legal guardians in some cases. You will also sometimes find that friends can also gift this.
Depending on the mortgage lender that you are applying for a mortgage with, there may be some limitations to who can and who can’t gift you the deposit for purchasing a property.
If you already know who is gifting you the deposit prior to making any applications, it is worth speaking with a qualified mortgage broker in Manchester. They will be able to match up your circumstances with an appropriate mortgage lender and product.
As a team of expert mortgage advisors in Manchester, we regularly find that not only are applicants hardly aware that a gifted deposit is an option, they don’t consider that their parents may actually be able to help.
Contrary to what you may believe, we find that most parents are more than willing to help their children finally get onto the property ladder and become a homeowner. It certainly doesn’t hurt to ask!
Many consider the concept of taking out a mortgage to be much better than renting a property, as you could be paying much less per month than you would be paying to a landlord.
A gifted deposit can sometimes come from inheritance, though this isn’t always later in life. Parents have been known to gift much earlier on in life if they already have enough in savings or have done equity release in Manchester.
Most mortgage lenders will dislike the idea of accepting loans as your deposit, as you’re essentially paying off two sets of large loans and are borrowing 100% of your mortgage.
You won’t be paying off your gifted deposit as this will only be a gift to you and you will not owe anyone any money, as per the agreement signed by your donor.
There is no limit to the amount that you are able to receive as a gifted deposit. We see that most people gift between the 3-5% mark, sometimes more.
If you are a first time buyer in Manchester or moving home in Manchester, a gifted deposit will be of a great benefit to you during your home buying process.
It can also be useful when in conjunction with a Help to Buy in Manchester, as the required 5% deposit, depending on the lender, can also be paid via gifted deposit!
You will need to provide an audit trail of where you got your gifted deposit from and where the person who gifted it to you built up the funds from.
Proving your gifted deposit is also much easier if you leave the proceeding within the gifter’s account, as later into your application process, your mortgage advisor in Manchester will help you evidence this as a gifted deposit.
Last edited 15/11/2022