• Number of homebuyers relying on gifted deposits climbs as house prices rise
• Top Tips for providing a cash gift to relatives buying a home and for buyers using a gift
Over 64,000 property purchases over the last year have seen the buyer rely on a gift of cash for all or part of their deposit,* according to analysis by myhomemove, the UK's leading provider of mover conveyancing services.
Rising house prices have left many buyers, particularly first time buyers, in need of support from the 'bank of mum and dad' to help them onto the housing ladder.
myhomemove warns that buyers using a gift for all or part of their deposit need to alert their conveyancer as early as possible, as legal checks must be carried out to comply with anti-money laundering rules, which can significantly slow down a purchase. This includes:
Providing evidence of where the money comes from – this could be a single bank statement or detailed evidence of how the money was accrued. This will be required from both the giver and receiver.
Ensuring that paperwork from the provider of the gift is signed and ready, as this is required by many mortgage lenders in order to prove that the money is a gift and not a loan.
In the 12 months to 30th June 2015, over one in twenty (5.36%) home completions involved gifted deposits. This has risen from 4.35% in Q2 2014 to 5.46% in Q2 2015 (see graph).
The percentage of homebuyers using a gifted deposits rises
Doug Crawford, CEO at myhomemove, comments:
"Buying a house can be one of the most stressful experiences people go through and times are certainly getting tougher for those trying to get onto the housing ladder, with house prices continuing to rise across the country and lending criteria becoming more stringent.
"For the growing number of first-time buyers looking to the 'bank of mum and dad' or 'bank of gran and grandad' to help secure their deposit, having the right paperwork in place at the outset is crucial to avoid added delays in the process.
"Those gifting the deposit will also have to undergo several checks to ensure no money laundering is taking place, so it's important that they know what is required. Mortgage lenders will often require a letter of consent from the person gifting the deposit, along with a bank statement, so being prepared at an early stage in the conveyancing process could ensure unnecessary delays are avoided.
"If it emerges late in a purchase that some of the deposit is a gift, it can be very difficult to pull the necessary paperwork together quickly – particularly if the person making the gift is unavailable because they are on holiday, for example."