According to a survey conducted by the Legal and General Group mums, dads and family will put a staggering £6.5 billion towards helping their loved ones buy a first home, during 2017 (1).
This means around 300,000 house purchases by first time buyers will be supported by deposits from family members.
When a family member gives either part of whole of the deposit to someone looking to purchase a home.
The deposit is not meant to be repaid and is therefore a gift so the person giving the money will have no right to get their money back or have any interest in the property. Mortgage lenders will require a gifted deposit letter, from the person gifting the deposit, which details these points.
The mortgage product chosen will in general not be affected by the deposit. The lender may ask to see bank statements where the gift has come from as further evidence.
We always recommend independent legal advice when gifting a deposit, to understand the full implications.
Lending a deposit
Much like gifting a deposit, a family member can loan someone either part or the whole of the deposit.
The loan can then either be repaid on sale of the property, for example via a deed of trust or repaid in monthly instalments. If a repayment schedule is required, then this would be drawn up by a solicitor.
Lenders will consider the loan during affordability assessments and it may affect the amount a person can borrow. The lender may ask to see bank statements where the gift has come from as further evidence.
In both cases independent legal advice would be recommended.
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