Property Focus: First Time Buyers and Gifted Deposits
7 March 2022
It is becoming increasingly popular for property purchasers, particularly first-time buyers, to rely on a gift of money, often obtained from family members, towards the deposit of their first home.
Whilst entirely legal, it is important to understand your solicitor’s obligations in verifying the source of the gifted deposit, particularly where there is a lender (bank) involved in the purchase. It is therefore imperative that you inform both your solicitor and mortgage advisor of any contribution towards your deposit at the outset to avoid any delay in the conveyancing process.
Once you have declared that a portion or the entirety of your deposit is to be gifted by a third party, your solicitor will need to obtain photographic ID and proof of funds from each proposed giftor to verify the source of the gifted deposit in compliance with Anti-Money Laundering regulations.
Most lenders will require the giftor to sign a declaration known as a gift waiver confirming that their contribution is an absolute gift as opposed to a loan and that they claim no interest in the property being purchased. The gift waiver serves to protect the lender who may seek to enforce their security over the property in the event it is repossessed without the risk of any third party acquiring an interest as a result of their deposit contribution.
It is important that all parties fully understand the terms of the gift waiver. For this reason, solicitors will strongly recommend that the giftor obtains independent legal advice before signing the gift waiver to ensure they fully understand what they are signing.
At MKB Law, we understand that purchasing a property can be a stressful and unfamiliar process. We strive to provide clear advice and assistance to help make matters as straightforward and hassle free as possible.
Please do not hesitate to contact a member of our residential property team should you have any further questions.