Why Gifted Deposits Could Help Secure Your Future Mortgage

With house prices fluctuating and challenges to get on the property market becoming ever more difficult, the option to gift deposit is becoming a more attractive and crucial role in helping borrowers secure a mortgage.

While we’re all familiar with the “Bank of Mum and Dad” (BOMAD), to help children get onto the property ladder, the reversal “Bank of Son and Daughter” (BOSAD) for parents to afford property is also becoming more popular.

The rise of gifted deposits

A recent research study by Legal & General (L&G) showed that gifted deposits from family members are expected to reach a record high of £9.2bn this year, climbing to £11.3bn by 2026.

While we typically think of parents or grandparents helping out with gifted deposits, children can also do the same for their parents.

Another study by L&G research showed that there is an increase of first-time buyers later in life, with a 13% increase in 56-65-year-olds searching for their first property in the first three months of this year compared to the same period last year. With retirement approaching, and the ongoing cost of living crisis, a gifted deposit could be crucial in helping them secure their mortgage.

Benefits of gifted deposits

Better mortgage rates: A larger deposit can improve the loan-to-value ratio. Therefore they are more than likely to secure you a better interest rate from a lender.
Easier approval process: Larger deposit may increase the chances of lenders overlooking lower credit scores and complex incomes as it reduces the overall risk for lenders.
Financial security: Gifted deposits can provide long term housing stability for parents or children.
Family bonds: They can also help strengthen your family ties, offering peace of mind regarding housing stability.

JBSP mortgages and buy-to-let

With the rise in gifted deposits, more lenders are offering flexible mortgage products to suit demand, such as Joint Borrower Sole Proprietor (JBSP) mortgages. With JBSP mortgages, parents or other family members can add their income to their child's mortgage application to boost affordability, while the child remains the sole owner of the property.

Gifted deposits have proven helpful for those seeking buy-to-let mortgages, as they assist buyers, including parents or children, in meeting the typically higher deposit requirements. However, JBSP mortgages are primarily used for residential purposes, where family members can contribute their income to help prove affordability for the buyer.

We currently accept JBSP for our buy-to-let mortgages.

Conclusion

Gifted deposits offer families the opportunity to secure a better mortgage deal, secure a better mortgage deal, improve financial stability, and achieve homeownership. With gifted deposits becoming more popular, lenders are now supporting borrowers by offering options like JBSP mortgages, so family members can contribute to the affordability of a property without being listed as co-owner.

That being said, whether through BOMAD or BOSAD, gifted deposits can be an invaluable source in helping younger and older buyers secure a mortgage.

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