Gifting Money To Our Children

Answered on 18 July 2016 by Nick Morrey

My wife and I are looking to help our son Jason with his first step on the property ladder. We have gifted him £250,000 as a (big!) deposit and he needs to get a mortgage for £100,000 for the place he is interested in. He starts work in August earning £25,000 basic. We are prepared to act as guarantors and make payments on his mortgage. I have a good job with earnings in excess of £250,000 per annum and no debt so doubt there will be a problem in this regard. Can you help?

Although not knowing your full financial position, it would appear, based on the information you have supplied that this something we can help you to explore. From the details you have supplied it looks like your son can get a mortgage for £100,000 as he will have an income of £25,000 per annum from August. Most lenders cap the income ratio to x4 income, however there are lenders on the market whom may be prepared to consider more. It is also important to remember that he would also need to factor in buying costs for purchasing a property such as solicitor’s fees, stamp duty and valuation costs.

In this instance, I don’t think you will need to act as a guarantor as your son has sufficient income to support the mortgage. However as you are gifting your son £250,000 the lender will probably need confirmation of the source and accumulation of the deposit funds and will request a ‘Gifted Deposit Letter’.  This will need the full name(s) of the person providing the gift, amount of gift, relation to the applicant(s), and whether any legal interest is to remain (including second charge). This will be needed in addition to the mortgage application due to anti money laundering requirements.

As with any mortgage application to enable me to provide you with more definitive clarity we would need your son’s full financial details and know the exact start date of your son’s employment, bank statement confirming salary credit and whether your son has found a property to purchase. I would suggest that you contact a John Charcol adviser directly who will be able to recommend the most suitable lender based upon your complete circumstances.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.


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