Gifted Deposit from Partner: Everything You Need to Know for Your Mortgage

Getting a gifted deposit from a partner for a mortgage is possible in the UK. However, you may need to consider various factors when trying to get a gift deposit from your partner.

It is important to note that gifting funds for a mortgage deposit are not the same as getting a joint mortgage. When you’re applying for a mortgage, you’ll need to provide evidence that proves the gifted funds are not a loan and won’t need to be repaid. Some lenders won’t accept such gifted deposits, and some will ask for additional documentation. So, it is always better to contact a mortgage broker before starting such a mortgage application.

As specialist advisers, we will also explore this topic in detail here. We would suggest you read this article first, and if you still have some queries, feel free to contact our team of experts.

Post Topics

What is a Gifted Deposit?

What Are the Requirements for Gifted Deposits?

What to Consider Before Accepting a Gifted Deposit from your partner?

What are the primary documents required for a gifted deposit from a partner?

Next Steps

FAQs on Gifted Deposit from Partner Mortgages in the UK 

What is a Gifted Deposit?

A gifted deposit for a mortgage is when one of the parties involved, usually parents or a partner, gifts money for the mortgage deposit. This money is not a loan, and it does not need to be repaid. The money must be a gift, and it must come from someone who is not part of the mortgage application.

What Are the Requirements for Gifted Deposits?

There are many requirements that each person involved in the gifted deposit mortgage application is included in the contract. We have discussed these requirements in detail below:

UK Requirements for Gifted Deposits

A gifted deposit is a common method for first-time buyers to reach the necessary deposit for their mortgage. However, there are certain prerequisites that must be met for the deposit to be acknowledged as valid by mortgage lenders in the UK.

Relationship Between Parties

Most lenders prefer that the gifted deposit originates from an immediate family member, such as a parent, grandparent, or sibling. This ensures that the bond is genuine and that there is no expectation of repayment. However, they may also accept gifts from other close relatives or friends or even from employers or charitable organisations.

Proof of Source of Funds

The lender will require evidence that the money is a gift, not a loan. This can be accomplished by providing a letter from the person gifting the money, explicitly stating that the money is a gift with no expectation of repayment. The letter should also include the name of the recipient, the amount of the gift, and the date the gift was bestowed.

Proof of Ownership of Gifted Funds

If the person gifting the money hasn’t owned the funds for an extended period, they may need to supply evidence of how they came into possession of the funds. This could include bank statementsA record of a borrower's financial transactions often requir..., tax returns, or other financial documents.

Proof of Identity

Both the recipient of the gifted deposit and the person gifting the money will require to provide proof of identification to the lender. This could include passports, driving licenses, or birth certificates.

Tax Implications

In certain instances, there may be tax consequences for the beneficiary of the gifted deposit. This is because the gift is considered income, and the recipient may be obliged to pay income tax on it. However, there are exemptions for gifts under specific thresholds.

Mortgage Affordability

Even with a gifted deposit, the individual receiving the mortgage must still be able to afford the repayments. This implies that they will need to clear the lender’s affordability checks. These checks will assess factors such as their income, outgoings, and credit score.

Seeking Professional Advice

It is strongly advised to seek expert guidance from a mortgage broker or financial adviser before accepting a gifted deposit. They can assist you in understanding the requirements and ensuring that the gift is handled in a manner that complies with all relevant rules.

What to Consider Before Accepting a Gifted Deposit from your partner?

There are many things that you may need to consider before accepting any gift deposit from your partner to buy a property, such as :

– The effect on your credit score

– Whether you have the income to sustain the mortgage payments

– Whether it’s best to use a joint mortgage or separate mortgages

– Any tax implications for both parties

– What happens if there is a relationship breakdown in the future?

It is also important to remember that a gifted deposit does not guarantee mortgage approval. We would suggest you contact a specialist mortgage broker to help you with the mortgage application process.

What are the primary documents required for a gifted deposit from a partner?

The primary documents required for a gifted deposit from a partner for a mortgage in the UK are as follows:

1. Gifted Deposit Letter

A gifted deposit letter is a formal document from the person gifting the money, stating that the funds are a gift and not a loan. The letter should include the following information:

• The name and address of the person gifting the money
• The relationship between the person gifting the money and the recipient
• The amount of the gift
• The date of the gift
• A statement that the gift is not a loan and is not expected to be repaid

2. Proof of Identity of the Person Gifting the Money

Both the person gifting the money and the recipient will need to provide proof of identity to the lender. This could include:

• Passports
• Driving licenses
• Birth certificates

3. Proof of Ownership of the Gifted Funds

If the person gifting the money has not already owned the funds for an extended period, they may need to provide proof of how they came into possession of the funds. This could include:

• Bank statements
• Tax returns
• Other financial documents

4. Proof of Relationship

The lender may require additional documentation to prove the relationship if the person gifting the money is not an immediate family member. This could include:

• Marriage certificates
• Civil partnership certificates
• Cohabitation agreements

5. Declaration of No Further Gifts

The person gifting the money may also be asked to sign a declaration stating that they will not be making any further gifts to the recipient for a certain period of time. This is to ensure that the gift is not being used to artificially inflate the recipient’s deposit.

In addition to these primary documents, the lender may also request additional information, such as:

• A statement of financial information from the person gifting the money
• A letter from the recipient’s solicitor confirming that they are aware of the tax implications of the gift

It is important to note that these are just the primary documents that are generally required. The specific documents that will be required will vary depending on the lender and the individual circumstances of the parties involved. It is always advisable to speak to a mortgage broker or financial adviser to get an accurate assessment of the requirements for a gifted deposit in your specific situation.

Next Steps

Getting a deposit from your partner, spouse, parents, friends or even landlord is possible but comes up with potential complications. If you are thinking of accepting a gift deposit from your partner, it is important to ensure that the agreement is clear on all sides and that you are fully aware of the financial implications for both parties.

If you need further advice, then please don’t hesitate to contact our team of expert mortgage advisers who can help you with the complete process.

FAQs on Gifted Deposit from Partner Mortgages in the UK

1. Are deposits gifted by family members acceptable when applying for a mortgage?

Yes, most mortgage lenders accept deposits provided as a gift, especially from close relatives, to assist with purchasing a home.

2. What is the impact of a deposit gift on my mortgage application?

A gift deposit can increase your initial equityThe difference between the value of the property and the amo... in the property, potentially improving the terms of your mortgage. Lenders will require evidence, such as a deposit gift letter, to ensure the funds are not a loan.

3. What details are required in a deposit gift letter?

The letter should state the donor’s name, their relationship to you, the amount given, and confirmation that the money is a gift without any obligation for repayment. It’s essential to use a clear and concise template for this document.

4. How do I address tax concerns with a deposit gift for my home?

Seek financial advice to navigate any tax implications, like Inheritance Tax, which may apply to the donor if they pass away within seven years of giving the gift.

5. What evidence is needed to confirm the source of a gift for my mortgage deposit?

Lenders will typically request a bank statement from the donor to verify the source of the funds and a letter confirming that the gift is not expected to be repaid.

6. What personal documents should accompany a deposit gift letter?

You’ll need to present proof of addressEvidence of a borrower's current address, such as a utility ..., such as a recent utility bill or bank statement, and identification documents, for instance, a driving licence, along with your mortgage application.

7. Can funds from a distant family member or friend be used for my house deposit?

While it’s more common for immediate family to provide such gifts, distant relatives and friends can also contribute. However, this may require additional scrutiny under anti-money laundering regulations.

8. Why do I need a solicitor when receiving a house deposit gift?

A conveyancing solicitor ensures that all aspects of the property transaction, including the house deposit gift, are legally documented and satisfy the lender’s requirements.

9. Is there a ceiling on how much can be contributed as a house deposit gift?

No statutory limit exists, but any financial gifts above the annual tax-exempt threshold may have implications for the donor’s estate.

10. Will a gift that I use for my deposit influence my mortgage repayments?

The gift itself won’t directly affect your monthly repayments; however, it could result in better mortgage rates or terms because of the larger down payment.

11. How can I prove that the money I received is a gift and not a loan for my property?

A declaration of trust or a similar legal document from the donor, alongside the gift letter, can serve as proof that the funds are a genuine gift.

12. Is it recommended that I consult a financial adviser when I receive a large sum of money for my property deposit?

Yes, it is advisable. A financial adviser can assist with the mortgage affordability calculation and help you understand any financial implications of the large sum received.

13. Are deposit gifts permissible in joint mortgage applications?

Indeed, for joint mortgages, each party can contribute a gift towards the deposit. Each contribution must be substantiated with proper documentation.

14. Must I inform any authorities about receiving a large gift for my deposit?

While you generally do not need to report the gift to authorities, significant gifts might have tax implications and should be discussed with a financial adviser.

15. What if the deposit gift is part of a promotional offer from a property developer?

In such cases, developers may offer a deposit contribution as an incentive to purchase a property. These contributions should be declared in the mortgage application and may be subject to particular lending criteria.