With high property costs, 4 out of 5 first time buyers receive financial help, be that a gift or loan, from their parents towards the deposit on their home. You would expect this to be a straightforward thing to do but unfortunately that often isn’t the case and it can delay the conveyancing process and at worst mean a mortgage offer is withdrawn if you get it wrong.
Receiving money from your parents to buy a home should be easy, however the Anti-Money Laundering laws, mortgage restrictions and the legal rights of all parties involved all come into play and need to be dealt with during the conveyancing process.
Some people are understandably unsure about whether funds they have received from someone constitute a gift or a loan.
Don’t make the mistake thinking that your parents can simply transfer the money into your bank account and for you to say the money is yours. During the conveyancing process your conveyancer will ask for proof of funds to confirm where the money originated from. Therefore, the gift will still come to light and the gifting process will still need to be followed.
Your conveyancer will be required to carry out legal checks on the person providing you with a gift to comply with anti-money laundering rules. Providing this information to your conveyancer early in the transaction will help avoid any delays. They will also require a letter from your parents confirming that the money they are providing is a gifted deposit and that they have no rights over the property. A signed letter should suffice and a copy of this should be supplied to your conveyancer. We will also advise the person making the gift to take independent legal advice to ensure that they are fully aware of the implications of providing the funds.
The reason this is so important, especially if you are also getting a mortgage, is that your conveyancer needs to prove that your parents will have no interest in the property and they are giving the money, never expecting it to come back. In fact, mortgage lenders may still refuse to lend a mortgage even though the money given is a gift simply because of the risks around the potential for parents to say that the money was in fact a loan and not a gift. You should speak to your chosen mortgage lender at the mortgage application stage or your mortgage advisor to see if they are happy for you to receive a gifted deposit. Consequently, when we report the same to the lender they will be able to confirm that they have been made aware of the gifted payment and are happy to proceed on that basis.
We have experience in dealing with gifted deposit cases so if you need a quote for your conveyancing then please get in touch by calling 01803 403403 or completing our contact us form for a call back.