Page 35 - March 2024

PROPERTY ADVICE

What is a gifted deposit? What are the requirements for However, you should bear in mind
A gifted deposit is where a mortgage gifting the money? the laws around inheritance tax when
is supplemented by a deposit that a The recipient will need to inform their deciding on the final figure, as your
family member (usually parents or mortgage lender and their solicitor child may be liable to pay tax on the
grandparents) has given the money that their deposit has been wholly or amount you give to them under certain
for. The amount can either cover the partially gifted to them. circumstances.
full deposit or part of it and allows
the recipient to get better access One of the most important A gifted deposit is tax-free for the
to mortgage deals and potentially requirements of giving money for recipient, but this only applies providing
lower monthly repayments, thereby a house deposit is that you, as the that you (the person who has given
making daily life more affordable provider, must supply a written the money) doesn’t pass away within
and helping them to get onto the declaration which states that the seven years of gifting the funds. If
property ladder in the first place. you did pass away within seven years,
money is a gift and is not required to and your estate is worth more than
be paid back to you. This declaration £325,000 (including the amount given
In the current financial should also state that the money given
climate, this is a gift that does not grant the person giving the for the deposit), then the recipient will
could be truly invaluable to the money any rights to the property. be liable to pay inheritance tax, which
recipient, who may be struggling to could be as much as 40%.
save a large enough deposit to counter Your declaration should also clearly
the property market and challenging state who you are and your relationship What if my child is buying with
mortgage conditions. someone else?
to the recipient, how much money is
being given and where it has come If your child is purchasing a property
It is important to note that when gifting from. You’ll need to declare you’re of with a partner, you might be concerned
a deposit, it must be exactly that: a gift. sound mind, and have an impartial about what would happen to the
You cannot expect this money to be witness sign the declaration too. money given if they decided to part
paid back to you; if so, your gift counts ways. You can protect your gift to your
as a loan, and the recipient’s lender Most mortgage advisors can provide child by having a solicitor draw up a
will consider this when conducting a template letter for you, or you could document called a Deed of Trust. This
affordability calculations. So, before have your solicitor draw one up. specifies that the money was given
you proceed, you must make sure that to your child, and not their partner.
this is money you can afford to give Therefore, if the couple were to split up
away freely, without expectation of its Alongside your written declaration, the and the property was to be sold, your
repayment. mortgage lender will ask for proof of child would retain ownership of the
your identity, which usually includes
photo ID and proof of address, as well money you gave to them.
Who can give a gifted deposit? as bank statements, to comply with
As a rule of thumb, most lenders will anti-money laundering regulations. If you’re considering helping your
only accept a gifted deposit when child with their property deposit,
the money has come from parents, How much money can be given? the expert mortgage advisors at
siblings or grandparents, with parents ESPC Mortgages can help. Visit
often being the preferred option for There’s no limit on how much money espc.com/mortgages for more help
some lenders. In most instances, gifted you can provide when gifting a deposit. and advice.
deposits from friends or extended
family members are not permitted.

34 | espc.com espc.com | 35