In the current market, there has been a steady rise in the use of gifted funds towards house purchases, so much so, that the ‘bank of mum and dad’ could officially be classed as a top 10 bank.
Here is what you need to know in order to make sure this does not affect the many aspects of the conveyancing process.
Common Misconceptions
There are several misconceptions people have when it comes to receiving any money from a third party, such as a parent or other relative, as many do not recognise it as a ‘gift’.
One that commonly comes up is the person who is gifting the money believing they have a share or interest in the property. This is not the case. The money is classed as a gift and they have no entitlement or equity in the property.
If the money was intended to be repaid, this would not be classed as a gift but as a loan. This could affect your mortgage offer as it will affect your affordability among other things.
Tell Your Mortgage Provider
If you are lucky enough to have a gift, it is essential that you inform your lender at the very start of the process when you apply for your mortgage.
Your solicitor will receive a mortgage offer which may not mention the gift and, as your solicitor also acts for your lender, they will be required to report the gift to them unless it is specifically referred to in your mortgage offer.
What You Need to Provide
The person gifting you the money will need to provide several things in order to make sure the process is legitimate. These include:
• Gift Letter – Your solicitor will ask them to sign a declaration to state, among other things, they are giving you the money and will have no equity in the property.
• Proof of Funds – Solicitors have to abide by strict Anti-Money Laundering (AML) regulations and they will have to see proof of funds and where the funds have come from e.g. recent bank statement.
• Identification – Passport, driving licence etc. Some solicitors require different forms of identification in order to adhere to the AML regulations, your solicitor will advise you what they will require.
Read more: The Legalities of Cash Gifts: How Much Money Can I Gift Tax Free?
Want to Learn More About Gifted Deposits?
If you are considering gifting someone a deposit or receiving monies towards a house purchase and would like to know more, our friendly, knowledgeable conveyancing team are just a phone call away.
Call 02920 404020 to speak to a member of the team today.
