Being gifted money for a house deposit? You must tell your solicitor to avoid delay
Nowadays, many people buying a property, especially first time buyers trying to get on the property ladder, rely on a gift of cash from a family member towards part or all of the deposit.
If you are receiving a gift, you should make your solicitor aware as soon as possible to avoid any unnecessary delays as there are steps that need to be taken. If you are taking out a mortgage, you should also inform your mortgage broker/advisor to ensure your lender is also aware of the gift from the outset of the transaction.
Once you have informed your solicitor about the gift, your solicitor will have to:
- carry out the usual anti-money laundering checks;
- identify the person who is providing the gift and obtain evidence of where the funds have originated from; and
- receive confirmation from the person providing the gift that the gift is not repayable and, most importantly, confirmation that they will not have any interest in the property.
Solicitors will normally document all of this in the form of a ‘gift letter’ which they will prepare on your behalf. Your solicitor will not be able to advise the third party on the gift being provided as this would result in a conflict of interest and therefore the third party may wish to take independent legal advice.
If you are obtaining a mortgage, your solicitor will need to report the gift from a third party to the lender. Your solicitor will not be in a position to proceed with your purchase until they have received confirmation from the lender that it is happy to proceed.
The lender will need to be made aware of the gift as it will want to ensure its security is protected. It will therefore want confirmation that:
- the third party is not expecting the gift to be repaid;
- the third party will not have an interest in the property; and
- the third party will not be residing in the property.
Any of the above could lead to complications for the lender in the future.
This is why it is imperative for you to make your lender aware of the gift as early as possible.
For more information please contact Sian Farrell.