What Are Builders Gift Deposits and Are They a Good Idea?

I have been looking at the Barratt Homes offer and they will match any personal deposit you provide up to a maximum of 5% mortgage deposit of the purchase price. This is called a Builder's Gift deposit and will need to be declared when you make a mortgage application. 

"Builders gift deposits" typically refer to incentives offered by builders to encourage buyers to purchase newly constructed homes. These incentives may come in the form of cash deposits, discounts on the purchase price, or upgrades to the home. 

What Is A Gifted Deposit 

In general lenders are happy to accept up to 5% of the purchase price as a Builder's Gift, so long as this is matched by 5% of your own personal funds.  

Are There Risks With A Gifted Deposit? 

You also need to be aware that there is normally a reason that builders make this kind of offer. It may be that they are having difficulty selling properties at the asking price without offering an incentive, in which case it possible the value of the property is judged to be lower than the purchase price and any mortgage offer will be based on this lower figure. If this happens you will need to find the difference from your own funds or negotiate a lower purchase price. 

I recommend that you speak to an independent mortgage broker about the choices available to you and also to speak to your solicitor about the Builder's Deposit and any strings that may be attached. 

Here's how they generally work: 

1. Cash deposits - builders may offer to contribute a certain amount of money towards the buyer's deposit or closing costs. For example, they might offer to cover a portion of the down payment required to secure financing for the home  
2. Discounts - builders may reduce the purchase price of the home as an incentive to buyers. This could result in a lower mortgage amount and monthly payments for the buyer  
3. Upgrades - builders may offer to include upgrades or amenities in the home at no additional cost to the buyer. This could include features like premium appliances, upgraded flooring, or custom finishes  

Whether builders gift deposits are a good idea depends on the specific circumstances and preferences of the buyer.

Here are some factors to consider: 

1. Financial benefits - builders gift deposits can provide financial benefits to buyers by reducing upfront costs, lowering the purchase price, or providing added value through upgrades. This can make homeownership more affordable and attractive for buyers  
2. Negotiation - buyers should carefully negotiate the terms of any incentives offered by builders to ensure they're getting the best possible deal. It's essential to understand the terms and conditions associated with the incentives and to compare them with other offers in the market  
3. Quality and reputation - buyers should research the builder's reputation and track record to ensure they're purchasing a high-quality home. While incentives may be enticing, it's essential to prioritise the overall quality and value of the home and the builder's reputation for craftsmanship and customer service  
4. Resale value - consider the potential impact of incentives on the resale value of the home. While incentives may make the initial purchase more attractive, they may not necessarily increase the home's resale value in the long term. Buyers should consider the long-term investment potential of the home and weigh the benefits of incentives against other factors like location, amenities, and market trends  

Ultimately, whether builders gift deposits are a good idea depends on the individual buyer's circumstances, priorities, and preferences. It's essential for buyers to carefully evaluate their options and make informed decisions based on their unique needs and goals. 

I recommend that you speak to an independent mortgage broker about the choices available to you and also to speak to your solicitor about the Builder's Deposit and any strings that may be attached. Please call on 0330 433 2927. They will be able to look at your situation and advise you accordingly.