Property Law
4 March 2024
Help for First-Time Buyers in Scotland
If you’re hoping to get your foot on the Scottish property ladder for the first time, there is support available....
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The process of buying a property can be daunting, and the looming pressure of saving for that all-important deposit can be overwhelming. Particularly in Scotland, with ever-increasing mortgage interest rates, the required deposit for a home purchase is climbing, especially for first-time buyers. In light of this, it’s crucial for potential buyers to explore an alternative avenue: Gifted Deposits.
What is a Gifted Deposit?
A gifted deposit is a financial lifeline offered by an immediate family member to cover part or the entirety of your deposit. It’s not a loan; it’s a gift, given with no expectation of repayment. Importantly, the family member providing this generous gift won’t stake any legal claims on the property you’re purchasing. There’s no future repayment obligation either.
Who Can Be a Gifted Depositor?
While most mortgage lenders accept gifted deposits from immediate family members like parents, siblings, or grandparents, there’s no one-size-fits-all rule. It’s highly advisable to consult your financial advisor or mortgage lender to confirm the acceptability of a gifted deposit, not only in principle but also from specific family members. This step can save you significant hassle down the line. It’s also essential to inform your appointed solicitor if you plan to use a gifted deposit.
How Large Can Gifted Deposits Be?
In general, there’s no upper limit on the size of a gifted deposit, unless a particular lender imposes one. However, bear in mind that exceptionally large gifts might trigger inheritance tax concerns. It’s always wise to be aware of potential tax implications.
Meeting Legal Requirements: Anti-Money Laundering (AML)
Obtaining a gifted deposit comes with strict anti-money laundering requirements. You’ll need to provide specific documents, including:
- A signed gift letter from the person(s) providing the deposit. This letter should follow the format preferred by your mortgage lender, so consult your Solicitor or financial advisor for guidance
- Photographic ID and a bank statement dated within the last three months for the gift provider(s)
- A minimum of six months’ worth of bank statements for the gift provider(s) showing the accumulation of funds, including full transaction histories
- Bank statements for the gift provider(s) illustrating the transfer of the deposit to you, again with full transaction histories
- Your bank statement indicating the gifted deposit’s receipt in your account, complete with your name and full transaction history
These requirements are in place to verify the source of the gift, ensuring compliance with anti-money laundering regulations.
The Gifted Deposit Process: What to Expect
Once you’ve put the necessary paperwork together, we’ll report it to your mortgage lender upon receiving the signed gift letter. Approval from the lender is crucial before your source of funds checks can be finalised. Please be aware that the timelines for lender responses can vary, and in some cases, transactions may experience delays beyond our control. To mitigate any potential hold-ups, we strongly advise providing the requested source of funds documentation as early as possible.
Our Property Law team possesses extensive experience and a profound understanding of the complexities surrounding gifted deposits in Scotland. We’re here to guide you through potential legal issues and ensure a smooth property purchase journey. Don’t hesitate to reach out to us today for the support and expertise you need.
