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Gifted Deposit Mortgage

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Gifted Deposit Mortgage

Rita Kohli talks to us about using a gifted deposit for a mortgage.

What is a gifted deposit and how does it work?

If you’re lucky enough to get a gifted deposit, it’s a step in the right direction towards buying a home. Typically, a parent would gift you the money. They may discuss the amount with you or decide to allocate a specific amount.

You can discuss between you as to when that money is transferred to you. Using a gift as a deposit is a real boost to help purchase your first property.

Can I use a gifted deposit as a first-time buyer?

Absolutely, there’s no restriction there. We just have to make sure that it is a gift and not a loan, by checking with whoever is providing the gift. Typically it’s a family member: mum, dad or grandparents, and they’re not expecting that money back.

What are the mortgage criteria for a gifted deposit? Do all mortgage lenders accept gifted deposits?

Yes, all lenders should accept them, but we do need to double check the lenders’ rules around who is gifting the deposit.

It’s not necessarily the amount that may have criteria, but the person gifting. They often prefer the deposit to come from immediate family members.

If you’ve got a gift of a specified amount, you would let your broker know. We can incorporate that as part of the amount you’re putting down – as you might be combining that with your own savings, as well.

Do I need a gifted deposit letter? If so, what needs to be included in it?

Every broker and lender is different. We have our own template to use that we will send out to you. You need to complete your details and if you’ve already identified a property, those details too. If we haven’t agreed on a lender yet, that can be left blank.

The key part in this template are the details of the person gifting you the deposit, how much they’re giving, plus their signature.

Even though you may have completed this for us, some lenders also require their own version. The person gifting the money might need to complete the information twice.

Can I only receive gifted deposits from family members?

It does tend to be family members. Lenders like to understand how you’re related if it’s not your mum, dad or grandparent.

Some lenders accept a deposit gifted by friends, or aunties and uncles. They may require further documentation and ID from the person gifting the money.

Is there a limit on how much can be gifted?

If you’re lucky enough to get any money, there isn’t a limit. It’s down to the person gifting to you and the conversations you have with them.

Do you have to pay tax on a gifted deposit?

If you’re a first-time buyer and you’re getting the gift, no, you don’t pay any tax. The person who’s issuing the gift should get advice from a tax adviser, their bank or building society, or an independent financial adviser, depending on where that money is coming from.

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We’ll help you compare mortgage offers from different lenders and find the one that’s right for you. We can also answer any questions you have about the mortgage process and help you understand the paperwork.

What will happen if a gifted deposit is not declared?

It would soon be discovered. Even if you don’t declare the gift at the beginning of a mortgage application, when you start to work with solicitors on the purchase, they will require evidence of where the deposit is coming from.

Perhaps you have £50,000 as a deposit and that money is sitting in your bank account. We would need to see how that £50,000 was accrued. It could require up to 12 months’ statements to understand the transactions.

A solicitor will do the same thing to trace where the funds came from. If they see a lump sum coming in, they need to know where that came from – and you would then say it was a gift. At that point they would need more evidence and letters to confirm that gift.

How do solicitors check the source of funds?

Solicitors actually do an even more thorough check than we do. We obviously check how the funds were accumulated, but the solicitors require whoever is gifting the money to show their own build up of funds for the deposit. There needs to be a full audit trail.

What’s the alternative to a gifted deposit?

You’d just have to save up for longer to reach the desired deposit amount. We can work with you on a plan, based on your disposable income and how much money you could save each month.

You could also look at schemes such as shared ownership. You still need a deposit for these, but it will be smaller. Some lenders at the moment may allow you to take a 100% mortgage – we could discuss and explore the options with you [information correct at the time of recording in January 2026].

What are the pros and cons of a gifted deposit?

I certainly don’t see any downsides to a gifted deposit. If you’ve done really well and managed to save up some deposit already, that additional gift can cover fees, stamp duty if it applies, solicitors’ costs or estate agent fees.

It depends where you’re at on your house buying journey – there are different rules for different stages.

It could help towards practical things like buying furniture. You might even decide to put the gift and your savings together as an even bigger deposit, which could mean you get a lower interest rate.

You’ve demonstrated throughout this episode how a mortgage broker can help. Have you got any final thoughts?

Just be prepared. When we ask for documentation around the buildup of your savings, forewarn the person gifting you the money about the requirements. They may need to write a letter and provide financial details, including bank statements, to show where the money’s coming from.

It’s important to have an open conversation so they’re prepared to share that information.

Key Takeaways:

  • A gifted deposit must be a genuine gift, typically from immediate family (parent, grandparent), and not a loan that the recipient is expected to repay.
  • While most lenders accept gifted deposits, they have specific rules, mainly regarding who provides the gift, often preferring immediate family. Some may accept gifts from friends or other relatives but require more documentation.
  • A gifted deposit letter is typically required, often using a template from the broker/lender. This letter must include the details of the person gifting, the amount, and their signature, confirming it is a non-repayable gift.
  • Solicitors conduct a thorough check of the gifted money’s source, requiring the person gifting to provide an audit trail and bank statements (potentially up to 12 months) to show how they accumulated the funds. Undisclosed gifts will be discovered during the solicitor’s checks.
  • A gifted deposit can be used to cover various costs like fees, stamp duty, solicitor costs, or to increase the overall deposit, potentially leading to a lower mortgage interest rate.

YOUR HOME IS AT RISK IF YOU FAIL TO KEEP UP PAYMENTS ON YOUR MORTGAGE OR OTHER LOANS SECURED AGAINST IT.

FOR SPECIALIST ADVICE, PLEASE REFER TO AN ACCOUNTANT OR TAX SPECIALIST.

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