Specialist conveyancing articles to inform you about conveyancing for a house or a flat; whether you already own your own home or if you are buying one. These are free to read and written by specialists in this area.

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Gifted Deposit Letter

23/03/2020
Your mortgage lender requires a gifted deposit letter during the conveyancing process if you are obtaining a gift from your parents or a friend. The reason for the letter is so that the mortgage lender can prove that the money is a gift and not in fact a repayable loan. The document is also known as a deed of gift.

The letter should be completed and provided to the conveyancing solicitor along with the gifted proof of ID, address and proof of funds. We explain in this article here - How to prove source of funds.

Is this a gifted deposit letter?

Dear Sir/Madam,

The money we paid to our son is a gift.

Kind regards.

Mum and Dad

All too often parents or friends gifting money email something similar to the solicitor as their declaration the deposit is a gift. Sadly when the solicitors receive these emails they invariably tell the children to inform the parents a simple statement like this isn’t sufficient for the purposes of the mortgage lender and that the parents have to send the information in the correct format. We include a gifted deposit letter template, explain what each part means and how to sign/witness.

Download a Gifted Deposit Letter template?

Use our updated Gifted Deposit Letter Template below which is suitable for your solicitor and mortgage lender.


7 stages of a Gifted Deposit Letter?


    1
    Who, relationship and address
The parties declare the full name of the person giving and receiving the gift, their relationship to them and the purpose.

For example: We assisting our daughter whose full name is Claudine Smith in their purchase of 41 An Example Road, B4 1NE.

    2
    Gift amount
The parties declare the gift amount and this should include all money being gifted toward the purchase including the gifted deposit and purchase costs.

For example: We are gifting her £25,000.

Buying your home using a Gifted Deposit?

We don't charge any extra if you are receiving a gifted deposit to help pay for your home, unlike so many other conveyancing solicitor firms, something really appreciated by our many satisfied first time buyer customers.

Fixed Fee - No Extra Charges for Gifted Deposit – No Sale No Fee – On all Mortgage Lender Panels


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    3
    The reason for the gift
The parties declare the reason why they are gifting he money. For parents gifting money to their children this is normally out of love and affection; a duty to help their children in life to buy their first home. This is very common. What is less common is for a friend to gift money to you as there isn't a normal reason to gift a large sum of money and not expect to get this repaid at some point in the future.

For example: We understand that by gifting the same to her that our action is a gift of love and affection.


    4
    The gift is not repayable
The parties declare that the money is a gift and is not repayable. This declaration ensures that the money cannot be called upon in the future because it now belongs to the home buyer.

For example: We declare that the gifted deposit is unconditional, non-repayable and does not give us any rights over the property and will not prejudice the security of their Mortgage Company, Nationwide Building Society.

How do you ensure your gifted isn't shared with the partner?

If you are a parent gifting money to a son or daughter and you don't want their partner to make a claim on the deposit then you can:

  • state in your gift letter that it is a gift just to your son or daughter; and
  • the buyers can get a deed of trust to confirm how much the joint owners individually own in the property. Read more about a deed of trust. The deed would protect the money invested in the property if the relationship breaks down.


    5
    You are solvent
The parties declare that they are solvent. The reason for this is that if the parties are made bankrupt up to 5 years after the gift then the administrator could force a sale of the property to repay the debts. Read more here - Insolvency Act Rules.

For example: We hereby confirm that at the date of this Declaration we are solvent, our assets exceed our liabilities and we have no reason to believe that we will become bankrupt.

    6
    Independent Legal Advice
The parties declare that they understand the solicitor acting for the parties buying doesn't provide them with any legal advice. The independent legal advice would be to explain the implications of gifting large sums of money and to confirm if they can financially afford this.

For example: We hereby confirm that we are aware that your solicitor cannot provide us with any legal advice in this matter and we have been advised by your solicitor to obtain independent legal and financial advice before proceeding further.

    7
    Signed and witnessed
The gifted deposit letter is signed by the parties in front of witnesses who in turn sign the letter. The witness cannot be a family member or someone who benefits from the transaction. A friend, neighbour or work colleague are fine to use. If you are overseas then the witness should be the notary public or solicitor used to verify your ID.


Frequently Asked Questions

Template Mortgage deposit gift letter by Lender?

Some mortgage lenders have a specific format for their mortgage deposit gift letter. Here are links to mortgage deposit gift letter examples:


What is in a Nationwide gifted deposit letter?

The parties giving the fit must declare the following to Nationwide in their form:

I/We confirm that the gifted deposit to the above named applicant(s) towards the purchase of the property stated above is an unconditional and non-refundable gift and I/we will have no rights or interest in the property whatsoever, OR if the gifted deposit is from a family member and is subject to a subsequent charge or family trust arrangement where the only condition is repayment of the gift upon the sale of the property I/we confirm that the only condition is that if the property is sold I/we will require the full amount of gift to be repaid, I/we confirm that no interest is charged, I/we do not require any repayments to be made and I/we will have no other interest or claim upon the property.

I/We understand that I/we may be asked for proof that I/we have the deposit monies available.

If I/we intend to reside in the mortgaged property I/we agree to sign a Consent to Mortgage form (or, if the property is in Scotland, affidavit/consent if applicable) prior to the mortgage completing*. I/We understand the importance of seeking independent legal advice and have had the opportunity to do so.

* The solicitor for the lender is responsible for obtaining the relevant Consent to Mortgage or consent/affidavit form.

Is a gifted deposit legally binding?

The gifted deposit letter is signed as a deed of gift and legally binding on the party who gave the gift. This means that if in the future they look to make a legal claim over the property for the repayment of the gifted deposit then the owners can provide a copy of this letter as evidence they have no right to the money.

Gifted Letter Content – Overly officious or absolutely necessary?

The declaration within the gifted deposit letter must contain more than just a one liner in relation to the gift. The main reason for this is that your solicitor is under a duty to advise the mortgage lender of the gift. The mortgage lender needs to be satisfied that the money is a gift and that the person gifting has no legal rights to it, nor can they request for the gift to be repaid.

Another issue to be covered within the gifted deposit letter relates to the solvency of the person gifting. The reason for this is that if the person gifting becomes bankrupt within 7 years of it being gifted, then the gift could be clawed back to settle the liabilities due.

If the person gifting is expecting to get the money paid back then this isn't a gift and it is a loan. Read more about this here - Is it a gift? or is it a loan?

Download a Gifted Deposit Letter template?

Use our updated Gifted Deposit Letter Template below which is suitable for your solicitor and mortgage lender.


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