Helping children purchase property can be a significant financial commitment, and using a gifted deposit can sometimes provide a route into the market when the buyers do not have sufficient funds of their own. I recently assisted a father who wanted to help his two sons purchase a buy-to-let property in London.
The father was a foreign national living in Kuwait, while both of his sons were in their mid-twenties. They were looking to purchase a new-build property in London as an investment, with the father offering to gift 35% of the purchase price towards the deposit.
There were several factors that made the application more complex. The family were Kuwaiti nationals with limited previous exposure to the UK property market, while the sons were both first-time buyers. Although first-time buyers can invest in buy-to-let property, some lenders take a more cautious approach where the applicants have no previous experience of property ownership.
The gifted deposit also needed to be acceptable to the lender, as not every lender is comfortable with this type of arrangement. We therefore needed to identify a lender that was familiar with both international borrowers and gifted deposits.
OUR SOLUTION
I approached lenders with experience of working with clients from the Gulf region and identified one with an international lending team that was comfortable considering the family’s circumstances.
The lender was prepared to accept the gifted deposit and consider the sons’ application despite their limited UK property experience. This allowed the family to structure the purchase around the father’s financial contribution while keeping the investment property in the sons’ names.
The resulting mortgage was arranged at 65% loan to value (LTV) over a 30-year term, providing the sons with the finance required to proceed with the investment.
The case highlights why buy-to-let mortgages can require a tailored approach when the borrowers are first-time investors and the deposit is being provided by a family member.
It also demonstrates the importance of specialist international mortgage expertise when overseas families are looking to invest in UK property. Lender criteria for foreign nationals, gifted deposits and first-time buy-to-let investors can vary considerably.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, property suitability and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances.
Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise.
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Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
