As more first-time buyers depend on help from family, 69% of parents do not look into the implications before lending money, research by David Wilson Homes has found.
The survey also revealed that 60% of new first-time buyers believed parental financial support was crucial for getting into the property market.
Almost three in 10 (27%) parents have financially assisted their children in purchasing a home, with 34% willing to contribute between £1,000 to £5,000.
Terry Higgins from The New Homes Group New Build Mortgage Services said: “A gifted deposit is when a family member or friend gifts you some, or all, of your deposit with no expectations for it to be paid back – this is classed as a gift and not a loan.
“Each lender has its own set of guidelines regarding who can provide a gifted deposit, typically restricted to parents or close relatives like siblings or grandparents.
“However, some lenders may also accept contributions from family friends.
“A gifted deposit doesn’t necessarily have to cover the entire deposit and can complement your own savings.
“Although, it’s essential that the giver agrees to relinquish any claim to the property.
“Apart from adding to your deposit, receiving a gift shouldn’t change your financial situation, as it’s freely given and not a loan.”
Higgins added: “A document commonly referred to as a ‘gifted deposit declaration’ or ‘gifted deposit letter’ is required.
“This document explicitly states that the funds are given as a gift with no expectation of property ownership or repayment.
“It must be signed and dated by the donor (the person giving the deposit) in the presence of a witness.
“Other requirements include proof of identification and the address of the donor, and a recent bank statement from the donor showing how the gifted money was accrued.
“It is important that this information is provided to your mortgage broker and conveyancer as early as possible in the buying process, as additional checks may need to be made and this will prevent any unnecessary delays.”
