Gifted Deposit Mortgage
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Gifted Deposit Mortgage
Adam Nunn and John Porter explain gifted deposits.
What is a gifted deposit and how does it work?
A gifted deposit is where funds have legally been gifted to you. It means they’re non-repayable and that the person giving you the money has no financial interest in the property.
Can I use a gifted deposit as a First Time Buyer?
Yes, you can. It’s estimated in fact that around 40% of all transactions received a gifted deposit towards their purchase last year – and partly this year, in 2025.
What are the mortgage criteria for a gifted deposit? Do all mortgage lenders accept gifted deposits?
Most lenders accept gifts, but the criteria can vary from one lender to another. Some of the most common considerations for a lender are whether the funds are coming from abroad. If so, certain lenders are more suitable than others.
Another focus is who’s gifting you the deposit? Most lenders typically want it to be a close family member, like a parent, grandparent or a sibling. But people do receive gifts from friends or wider family members, and some lenders are more open to gifts coming from further afield.
We also need to know whether the person gifting the money intends to live in the property. Not all lenders like it if someone gifts you money and actually wants to live with you. That can cause concern about the person’s genuine interest in the property, and it can also have wider tax complications.
Do I need a gifted deposit letter? If so, what needs to be included in it?
Yes, you will need a gifted deposit letter. Some lenders have made it a lot simpler and there are templates we can provide once we know which lender we’re going to. We also have a generic template if needed.
With regards to what’s required, it’s details about the donor – their name, address and relationship to the person they’re gifting to. We also need the recipient’s details – who’s receiving it.
The letter should also state the gift amount, confirming that it’s a gift, not a loan, and there’s no legal charge on the property because of the gift. We also need confirmation that there’s no repayment involved and the gifter will not be residing at the property. Finally, it needs to be signed and dated.
Can I only receive gifted deposits from family members?
While most lenders require the person gifting to be an immediate family member, some lenders will accept it coming from more distant relatives, friends or partners.
Is there a limit on how much can be gifted?
No, there’s no limit.
Do you have to pay tax on a gifted deposit?
Currently, as of September 2025, there’s no direct tax on giving or receiving a gift. However, a gift is subject to inheritance tax rules if the donor dies within seven years of providing the money.
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What will happen if a gifted deposit is not declared?
It’s essential to be honest about the source of your deposit, to ensure that we place the mortgage with the right lender and avoid any complications further down the line. We complete due diligence checks on the source of funds, to mitigate any risks involved and ensure that we go to the correct lender first time.
If it does come to light that there’s a gifted deposit during the application, or after you’ve received a mortgage offer, it can cause issues with the lender and they might have to do further checks.
In addition, undeclared gifts can have legal implications. If it’s not declared, the donor could have a legal interest in the property – they could ultimately claim ownership of part of your property.
How do solicitors check the source of funds?
It’s a very similar process to what we do for our due diligence checks. Ultimately, they want to see the donor’s ID, proof of address, gifted deposit letter and the source of funds.
The source of funds is proved by bank statements and other documents. Solicitors might have their own procedures around how far back they request statements or documents, depending on the source.
The solicitor will also do anti-money laundering checks, which can include proof of ID, and they do bankruptcy searches as well.
How many bank statements do I need for a gifted deposit?
One bank statement showing the funds is not sufficient. We need an understanding of where they have come from – so it’s about getting the evidence together. We might want six months or a year to build up evidence of savings.
Or, it could be that someone has sold an asset like an investment property, or drawn down from a pension or inheritance. Further checks may be required from there. How far back you need to go will depend on the source of funds.
What is the seven year rule for gifted deposits?
These are the inheritance tax rules. If a donor dies within seven years of gifting the money, then the gift may be subject to inheritance tax.
It’s important that this is considered when giving or receiving a deposit. Currently, there are allowances for giving away money each tax year, which will be totally exempt from inheritance tax.
Of course, it is advisable to seek independent financial advice about potential inheritance tax implications.
What is the alternative to gifted deposits? Is it savings?
Yes, savings is an obvious one, or potentially someone could lend you the money – although not many lenders accept loans as a deposit. It would involve checking the legal requirements on how the loan is being repaid.
Another alternative is a Joint Borrower Sole Proprietor mortgage, where family, partners and friends agree to go on the mortgage with you. By utilising their income, you can borrow more. We’ve done a whole podcast on this in the past.
There are also other mortgages where parents can assist you without gifting money. This could involve their savings or equity within their own property. We’d see what would be the right option available to you.
What are the pros and cons of a gifted deposit?
The main pro is that it’s contributing to your deposit. If it’s improving your Loan to Value, that could widen the lenders available to you – which also improves the interest rates.
If you’ve got a 5% deposit in savings and your parents agree to gift you a further 5%, you’ve now got 10%, so you’re now eligible for 90% Loan to Value mortgages. There will be better interest rates at that Loan to Value than at 95%.
There aren’t any major drawbacks, as ultimately you are at a financial advantage by receiving a gift. Although, when the source of the gift is complex, perhaps coming from abroad, you might not have as many lenders to choose from. That might impact the interest rates available to you.
Another drawback would be any legal or potential inheritance tax considerations.
How can a mortgage broker help here? Any final thoughts?
One thing to mention is that there are other options. Perhaps parents are supporting their son and their partner to become owners of a property and want to protect their interest in it.
Perhaps the parents put in 60% of the deposit with 40% from the couple. You can set up the property ownership to reflect that, by owning it as tenants in common. That’s a legal form of protection.
Another option is to define the deposit contribution towards the purchase as a second charge on the property. The mortgage lender obviously has first charge, and so when the property is sold, the lender gets their money back first, the parents then receive their proportion back, and then the equity goes to the owners of the property.
As we mentioned earlier, at least 40% of property transactions now receive gifts. If you’re a parent or family member who would like to help but you don’t have savings, you could instead offer up a reliable income or equity within your property. We would explain the options available to you to help your family member.
One final point is that if parents have inherited a property, have a second home or an investment property, they could gift their equity. That’s another area we can explore to help a family member. So talk to a broker and we can see what could work for you.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
For specialist tax advice, please refer to an accountant or tax specialist.