- Number of homebuyers relying on gifted deposits climbs as house prices rise
- Top Tips for providing a cash gift to relatives buying a home and for buyers using a gift
Over 64,000 property purchases over the last year have seen the buyer rely on a gift of cash for all or part of their deposit, according to analysis by myhomemove, the UK’s leading provider of mover conveyancing services.
Rising house prices have left many buyers, particularly first time buyers, in need of support from the ‘bank of mum and dad’ to help them onto the housing ladder.
myhomemove warns that buyers using a gift for all or part of their deposit need to alert their conveyancer as early as possible, as legal checks must be carried out to comply with anti-money laundering rules, which can significantly slow down a purchase. This includes:
- Providing evidence of where the money comes from – this could be a single bank statement or detailed evidence of how the money was accrued. This will be required from both the giver and receiver.
- Ensuring that paperwork from the provider of the gift is signed and ready, as this is required by many mortgage lenders in order to prove that the money is a gift and not a loan.
In the 12 months to 30th June 2015, over one in twenty (5.36%) home completions involved gifted deposits. This has risen from 4.35% in Q2 2014 to 5.46% in Q2 2015 (see graph).
Doug Crawford, CEO at myhomemove, comments:
“Buying a house can be one of the most stressful experiences people go through and times are certainly getting tougher for those trying to get onto the housing ladder, with house prices continuing to rise across the country and lending criteria becoming more stringent.
“For the growing number of first-time buyers looking to the ‘bank of mum and dad’ or ‘bank of gran and grandad’ to help secure their deposit, having the right paperwork in place at the outset is crucial to avoid added delays in the process.
“Those gifting the deposit will also have to undergo several checks to ensure no money laundering is taking place, so it’s important that they know what is required. Mortgage lenders will often require a letter of consent from the person gifting the deposit, along with a bank statement, so being prepared at an early stage in the conveyancing process could ensure unnecessary delays are avoided.
“If it emerges late in a purchase that some of the deposit is a gift, it can be very difficult to pull the necessary paperwork together quickly – particularly if the person making the gift is unavailable because they are on holiday, for example.”
myhomemove’s top tips on giving or receiving a gifted deposit
1. Inform your conveyancer – as soon as your officer is accepted, ensure the conveyancer is aware that some or all of the deposit is a gift.
2. Provide evidence that the money was a gift and not a loan – when giving a gifted deposit, the lenders will need written consent – often as a letter or part of a form – confirming the money was a gift and the provider has no personal interest in the property.
3. Ensure you have the right proof of Identification – this may sound simple, but quite often photocopies of ID will not be accepted by a solicitor. This can become problematic if the person giving the gift is either overseas or unavailable.
4. Have the necessary bank statements at the ready – part of the process involves anti-money laundering checks which includes checking bank statements from the person giving the gift and the recipient, to confirm that the money was earned legitimately.
5. Understand what a gifted deposit means for you – most importantly, if you are the contributor of a gifted deposit, you must be aware that once you complete the process, you no longer have any rights to the money or the property.
