Saving enough money for a house deposit can be one of the biggest barriers to buying a property. For many buyers, particularly first-time buyers, help from parents or other family members can make the difference between buying now and waiting several more years.
This is commonly known as a gifted deposit.
Using a gifted deposit for a mortgage is perfectly possible, but lenders and conveyancers will usually want to understand who provided the money, where it came from and whether it is genuinely a gift rather than a loan.
At Oportfolio Mortgages, we regularly help buyers using gifted deposits and know that the requirements can vary considerably depending on the lender, donor and source of the funds.
Quick Answer: Can You Use a Gifted Deposit for a Mortgage?
Yes. Many mortgage lenders accept gifted deposits, particularly when the money is being provided by a parent or close family member.
The person providing the money will normally need to confirm that it is a genuine gift, that they do not expect it to be repaid and that they will not acquire an ownership interest in the property as a result of the gift.
You may also need to provide evidence showing where the money came from.
Exactly who can provide a gifted deposit and what evidence is required varies between mortgage lenders, so it is worth checking the criteria before submitting your mortgage application.
What Is a Gifted Deposit?
A gifted deposit is money given to a property buyer to help fund their purchase.
Unlike a loan, the money is normally provided without an expectation that it will be repaid.
For example, if you were purchasing a property for £400,000 and had saved £20,000 yourself, your parents might provide another £20,000 as a gift.
You would then have a:
£40,000 deposit
on a:
£400,000 property
meaning you would require a:
£360,000 mortgage at 90% loan-to-value (LTV).
The important distinction is that the additional £20,000 has been gifted, rather than borrowed.
How Does a Gifted Deposit Mortgage Work?
A gifted deposit mortgage isn’t necessarily a special type of mortgage.
Instead, it is a normal mortgage application where some or all of the buyer’s deposit has been provided as a gift.
The process will typically involve telling your mortgage adviser and lender that the deposit is gifted and providing any documentation they require.
Your solicitor or conveyancer may also need to carry out their own checks on the gifted funds.
This is why it is better to disclose a gifted deposit at the beginning of the process, rather than waiting until the mortgage application or conveyancing is already underway.
Who Can Gift You a Mortgage Deposit?
Parents are probably the most familiar source of gifted mortgage deposits, but they aren’t necessarily the only people who can provide one.
Depending on the mortgage lender, acceptable donors could potentially include:
- parents;
- grandparents;
- siblings;
- other relatives; or
- in some circumstances, friends or other individuals.
The important phrase here is depending on the lender.
Different mortgage lenders can have different definitions of an acceptable donor.
If you know that your deposit will be provided by somebody other than a parent or close family member, it is particularly important to establish whether the proposed lender will accept the arrangement before applying.
Can My Parents Gift Me a Deposit for a House?
Yes. A gifted deposit from parents is a common way for buyers to receive help towards a property purchase.
The parents will normally need to confirm that the money is a genuine gift and may need to provide evidence of the source of the funds.
The lender and conveyancer can have their own documentation requirements, so don’t assume that simply transferring the money into the buyer’s bank account completes the process.
The gift should be disclosed properly as part of the purchase.
Can a Friend Gift Me a Mortgage Deposit?
Potentially, but this is more dependent on the individual lender.
Some mortgage lenders are more restrictive about who can provide a gifted deposit than others. A lender comfortable with a gift from a parent may not necessarily take the same approach to money provided by a friend or unrelated third party.
If a friend is providing your mortgage deposit, check that the relationship between you and the donor meets the proposed lender’s criteria before applying.
The donor may also need to provide identification and evidence explaining where the funds came from.
A gift from a friend therefore isn’t necessarily impossible, but lender selection can become more important.
What Are the Gifted Deposit Rules?
There isn’t one universal set of gifted deposit rules used identically by every UK mortgage lender.
However, lenders will generally want to establish that the deposit is genuine and understand where the money has come from.
Depending on the lender and circumstances, this can involve confirming:
- the donor’s identity;
- their relationship to the borrower;
- the amount being gifted;
- the source of the money;
- that repayment isn’t expected;
- that the donor won’t acquire an interest in the property; and
- that the funds are available for the purchase.
Your conveyancer may carry out additional source-of-funds and anti-money-laundering checks.
The exact evidence required can therefore vary from one purchase to another.
What Evidence Do You Need for a Gifted Deposit?
Documentation requirements depend on the lender and conveyancer, but you may be asked for things such as:
A gifted deposit declaration or letter
Confirming the amount being gifted and the nature of the gift.
Identification from the donor
For example, documents required to verify their identity.
Evidence of the source of funds
This could involve statements or other documentation showing where the gifted money came from.
Evidence of the transfer
Once the money has been moved, evidence may be required showing the movement of funds.
Don’t wait until immediately before completion to start gathering this information.
If you know that you will be using a gifted deposit, tell your mortgage adviser and conveyancer early so they can explain what will be required.
What Is a Gifted Deposit Letter?
A gifted deposit letter is a document confirming the details of the gift.
The exact wording required can vary, particularly where a lender has its own gifted-deposit form, but the document will typically identify the donor, recipient and amount being gifted and confirm the nature of the arrangement.
MoneyHelper specifically lists a gifted deposit declaration as one of the documents that may be required during the mortgage application process.
Oportfolio has created a free Gifted Deposit Letter Template to help buyers understand the type of information that may be required.
Download our Gifted Deposit Letter Template
Always check whether your mortgage lender or conveyancer requires its own form or additional wording.
Do You Have to Declare a Gifted Deposit?
Yes, you should be open about the fact that your deposit has been gifted.
A mortgage lender needs accurate information about how the purchase is being funded, while your solicitor or conveyancer will also need to establish the source of the money involved in the transaction.
Trying to present gifted money as your own accumulated savings can create unnecessary problems later in the application.
The simplest approach is to tell your mortgage adviser from the outset:
who is providing the money, how much they are providing and where the money has come from.
The appropriate lender can then be assessed with that information in mind.
What Happens If You Don’t Declare a Gifted Deposit?
If your deposit was provided by somebody else, don’t deliberately describe it as your own savings.
Mortgage applications should accurately reflect your financial circumstances and the source of the deposit.
If information provided to the lender is inaccurate, the lender may need to reassess the application and this could potentially result in delays or the application being declined.
Deliberately providing false information is clearly more serious than simply misunderstanding what documentation is required.
If you’re unsure whether money you’ve received needs to be disclosed, speak to your mortgage adviser and conveyancer rather than making an assumption.
When Does a Gifted Deposit Become Savings?
There isn’t a universal point at which a gifted deposit simply becomes ordinary savings for mortgage purposes.
If money was originally given to you as a gift, you should be prepared to explain the source of those funds when applying for a mortgage, even if the money has been sitting in your bank or savings account for some time.
Mortgage lenders and conveyancers can ask for evidence relating to the source of deposit funds, and requirements vary depending on the circumstances.
Simply moving gifted money into a savings account or leaving it there for several months shouldn’t therefore be treated as a way of avoiding the need to explain where it originally came from.
If you received money some time ago and aren’t sure how it should now be treated for your mortgage application, discuss it with your mortgage adviser and conveyancer.
Can You Pay Back a Gifted Deposit?
This is an important distinction.
If the person providing your deposit expects the money to be repaid, it may not be a genuine gift.
It could instead constitute a loan or another financial arrangement.
That can matter to the mortgage lender because an obligation to repay the money could affect both the nature of the deposit and your financial commitments.
Similarly, if the donor expects to receive a share of the property in return for providing the money, this should be made clear before the mortgage application proceeds.
If repayment or ownership is expected, tell your mortgage adviser rather than describing the money as an unconditional gift.
Can a Gifted Deposit Come From Abroad?
Potentially.
However, an overseas gifted deposit can involve additional checks because the lender and conveyancer may need to establish the source of the money and understand how the funds reached the UK.
The requirements can depend on factors such as:
- where the donor lives;
- where the money is held;
- the source of the funds;
- the documentation available; and
- the lender and conveyancer involved.
If your deposit is coming from overseas, raise this before choosing a mortgage lender rather than transferring the money first and dealing with the questions afterwards.
Is There Tax on a Gifted Mortgage Deposit?
Receiving a gifted deposit does not automatically mean that the recipient has an immediate tax bill simply because they received the money.
However, Inheritance Tax can become relevant to lifetime gifts, depending on the donor’s circumstances.
HMRC explains that most lifetime gifts that aren’t covered by an exemption are potentially exempt transfers. Broadly, if the donor survives for seven years after making such a gift, it can fall outside their estate for Inheritance Tax purposes. Different exemptions and rules can also apply.
This is therefore separate from whether a mortgage lender will accept the deposit.
Oportfolio provides mortgage advice rather than tax advice. If you or the person providing the deposit is concerned about the tax or estate-planning consequences of making a substantial gift, you should seek appropriate tax or financial advice.
What Problems Can You Have With a Gifted Deposit?
A gifted deposit doesn’t automatically make a mortgage application difficult.
Problems are more likely to arise when the source, donor or terms of the gift haven’t been considered early enough.
Common issues can include:
- the lender not accepting the relationship between the donor and borrower;
- insufficient evidence showing where the funds originated;
- the donor expecting the money to be repaid;
- the donor expecting an ownership interest in the property;
- funds arriving from overseas and requiring additional checks;
- the gift being disclosed late in the mortgage process; or
- documentation not satisfying the lender or conveyancer’s requirements.
Many of these issues are easier to address before a mortgage application is submitted.
Does a Gifted Deposit Affect How Much Mortgage You Can Get?
The fact that your deposit is gifted doesn’t automatically determine your mortgage affordability.
Your lender will still assess whether you can afford the mortgage based on your income, expenditure, existing commitments and its own lending criteria.
However, the size of the deposit can affect the loan-to-value of your mortgage.
For example, if you had £25,000 of your own savings and received another £25,000 from your parents towards a £500,000 property, your total deposit would be £50,000.
That would mean you require a:
£450,000 mortgage at 90% LTV.
A larger deposit could potentially reduce the LTV further. Loan-to-value can influence the mortgage products and rates available.
Can First-Time Buyers Use a Gifted Deposit?
Yes.
Gifted deposits are commonly associated with first-time buyers because family support can help bridge the gap between the buyer’s savings and the deposit required for their chosen property.
But being a first-time buyer doesn’t remove the lender’s documentation requirements.
You should still disclose the gift and establish what evidence will be required from the donor.
It’s also useful to work out the mortgage affordability before deciding how much needs to be gifted.
That gives the buyer and donor a clearer idea of the overall property budget rather than choosing a deposit amount in isolation.
A Gifted Deposit Mortgage Case We Worked On
We recently helped a first-time buyer purchasing in London who had stable employment and a good credit profile but needed family support to complete their deposit.
Before submitting the mortgage application, we reviewed the gifted-deposit requirements alongside the wider mortgage criteria.
This included establishing the relationship between the borrower and donor and identifying the documentation and source-of-funds evidence that would be required.
The gifted deposit was accepted and the mortgage proceeded.
The important part of the case wasn’t simply finding a lender that said it accepted gifted deposits. It was making sure the client’s particular gifted-deposit arrangement fitted the lender’s requirements before the application was submitted.
Read the full Gifted Deposit Mortgage Case Study
Oportfolio Insight
When we’re dealing with a gifted deposit, the question isn’t simply:
“Does this lender accept gifted deposits?”
We also need to understand:
Who is providing the gift? Where did the money come from? And is that particular lender comfortable with the donor and source of funds involved?
A straightforward gift from a parent using established UK savings can present a different case from money being gifted by a friend, a relative overseas or from funds that have recently come from another asset.
That’s why we recommend discussing a gifted deposit at the beginning of the mortgage process, rather than waiting until an application has already been submitted.
Knowing how the deposit is being funded from the outset means we can take that into account when assessing which lenders may be appropriate.
Key Takeaways
A gifted deposit can be used towards a mortgage, but the lender will normally want to understand where the money has come from and whether it is genuinely a gift.
Parents and close family members are commonly accepted donors, while gifts from friends and other people can be more lender-dependent.
You should declare the gifted deposit rather than presenting it as your own savings.
The donor may need to provide a gifted deposit letter or declaration, identification and evidence showing the source of the funds.
There isn’t a universal point at which gifted money simply becomes savings for mortgage purposes.
And if the money needs to be repaid, make this clear, it may be treated differently from an unconditional gift.
Speak to Oportfolio About a Gifted Deposit Mortgage
If some or all of your house deposit is being provided by a parent, relative, friend or another person, it is worth checking the mortgage criteria before submitting an application.
At Oportfolio Mortgages, we can review your deposit arrangements alongside your income, affordability and wider circumstances to identify lenders whose criteria may be suitable.
Whether you’re a first-time buyer receiving help from your parents or have a more complicated gifted-deposit arrangement, our advisers can help you understand what may be required and guide you through the mortgage process.
Speak to Oportfolio Mortgages about your gifted deposit mortgage.
