With housing affordability at an all time low, mortgage lenders and property developers have invented various schemes available to help people get a foot on the property ladder without requiring a large deposit. One such scheme is involves gifted deposit mortgages.
Gifted deposit mortgages allow people to purchase property without having to put in a large cash deposit. Instead, the builder will gift the deposit to the property buyer and the mortgage lender will allow them to use it in lieu of a cash deposit.
Effectively, a builder gifted deposit is a discount off the list price of a property. The mortgage lender will issue the mortgage funds on the undiscounted value, or gross price, of the property instead of the net price.
This will either reduce or remove the requirement for the property buyer to fund the deposit from their own savings or other resources.
The mortgage lender must be made aware of the builder gifted deposit if it is to be used by the property buyer, and the lender must approve of the situation. The borrower will also be required to use any one of several gifted deposit mortgages available in the market instead of a standard mortgage product.
Another type of gifted deposit which has become popular in recent years is a gift from a family member or friend. For this type of gifted deposit, the property buyer will receive a cash gift and they will use it to fund the deposit.
Property buyers who are fortunate enough to be able to borrow deposit money from their family or friends may still be required to use gifted deposit mortgages instead of regular mortgage products. Lenders may also want to be made aware of the true source of the deposit funds.
Gifted deposit mortgages should not be confused with "no deposit mortgages" which have loan-to-value ratios of 100% or more. No deposit is required because the property will be purchased in full using the loan funds.
The terms, conditions, and availability of gifted deposit mortgages can change over time and vary between products and lenders.
Because gifted deposit mortgages are specialist mortgage products, advice should be sought from an independent qualified mortgage adviser in order to select the right product to suit your personal financial situation.
Gifted deposit mortgages allow people to purchase property without having to put in a large cash deposit. Instead, the builder will gift the deposit to the property buyer and the mortgage lender will allow them to use it in lieu of a cash deposit.
Effectively, a builder gifted deposit is a discount off the list price of a property. The mortgage lender will issue the mortgage funds on the undiscounted value, or gross price, of the property instead of the net price.
This will either reduce or remove the requirement for the property buyer to fund the deposit from their own savings or other resources.
The mortgage lender must be made aware of the builder gifted deposit if it is to be used by the property buyer, and the lender must approve of the situation. The borrower will also be required to use any one of several gifted deposit mortgages available in the market instead of a standard mortgage product.
Another type of gifted deposit which has become popular in recent years is a gift from a family member or friend. For this type of gifted deposit, the property buyer will receive a cash gift and they will use it to fund the deposit.
Property buyers who are fortunate enough to be able to borrow deposit money from their family or friends may still be required to use gifted deposit mortgages instead of regular mortgage products. Lenders may also want to be made aware of the true source of the deposit funds.
Gifted deposit mortgages should not be confused with "no deposit mortgages" which have loan-to-value ratios of 100% or more. No deposit is required because the property will be purchased in full using the loan funds.
The terms, conditions, and availability of gifted deposit mortgages can change over time and vary between products and lenders.
Because gifted deposit mortgages are specialist mortgage products, advice should be sought from an independent qualified mortgage adviser in order to select the right product to suit your personal financial situation.
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