Property Law
19 April 2023
Sell your home using these eight tips
Do these things to help you sell your home better and faster Preparation is key when selling your home. By...
Read article
Why Gifted Deposits Are Important if You Struggling to Save For a Deposit.
Gifted deposits can be your helping hand onto the property ladder, but you need to understand how to approach your mortgage application and property purchase if you are in the lucky position to have had a helping hand.
Understanding What a Gifted Deposit is
A gifted deposit is just that, a gift there can be no expectation of any form of repayment like a loan. Gifted deposits usually come from a family member, such as a parent or grandparent, some buyers might receive them from a trust or estate as part of an inheritance.
Why Gifted Deposits are Game Changes for Buyers in Scotland
The helping hand of a gifted deposit can be a real game changer for many first-time buyers; a larger deposit can help you secure a bigger property or a better LTV (loan-to-value ratio) which can mean a lower monthly mortgage payment.
Who Can Gift a Deposit for a House Purchase in Scotland?
In most cases your family will be the ones to gift the deposit to you, usually your parents or grandparents, but it is vital to check with your mortgage lender as they all have their own rules, this is not always clear when you apply for your decision in principle so it’s worth speaking to them directly.
Legal Requirements and Documentation for a Gifted Deposit
To ensure everything is above board, you’ll need to provide several documents:
- Gift Letter: A signed letter from the person providing the deposit, stating that the money is a gift and not a loan.
- Identification: photo ID such as a passport or driving licence and your recent bank statements from the gift provider. Most banks are now paperless so it’s best to check if they will accept a PDF or if they require a printed statement.
- Proof of Funds: Bank statements showing the accumulation and transfer of the gifted funds
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 our Property Law Team 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.
What Rules do Banks and Mortgage Lenders Have for Gifted Deposits in Scotland?
Each bank and mortgage lender will have their money laundering requirements, so it’s best to speak to them directly and find out which ones you are required to provide before you accept the gifted deposit.
Banks and mortgage lenders are very strict when it comes to money laundering regulations and taking the steps outlined above will help satisfy the process and save any delays when applying for your mortgage.
Tax Implications from Gifted Deposits
If you have concerns about inheritance tax read our guide on tax implications for gifted deposits.
How Does the Gifted Deposit Process Work When Applying for a Mortgage?
It’s vital to check with your lenders and solicitors what you need to start the process, once you have gathered all the documents our Property Law Team will report the gifted deposit to your mortgage lender as this is vitally important before they finalise checking your source of funds.
About Scullion LAW
Scotland is one of the best places to buy your first home, for many people it’s a dream come true, Scullion LAW has helped many first-time buyers start their journey. We also specialise in helping overseas buyers and those with gifted deposits.
