How does a gifted deposit work?
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How does a gifted deposit work? (Part 1)
Paul Collinson explains how a gifted deposit works and what this means for first-time buyers.
How does gifting a deposit for a mortgage work?
It’s a gift given to you normally from a close blood relative. A couple of lenders are okay with the deposit being gifted from a friend, but most lenders want it to be from a brother, sister, mother or father.
It’s very common these days. For many first-time buyers, there is often an element of a gifted deposit from a family member.
Is it possible to use a gifted deposit for a Buy-to-Let property?
Yes. It’s not as common as with residential property, but quite a few lenders are fine with a gifted deposit for Buy-to-Let.
What is the maximum amount that can be gifted as a deposit for a mortgage?
There really isn’t a maximum. There’s no limit on the amount that can be gifted.
What are the requirements for someone who’s gifting a deposit?
Normally, they have to be a close relative, with most lenders, but a few accept a gift from a friend. That person needs to supply proof of the money building up in their savings over the last three months.
They therefore need three months’ bank statements or proof of an ISA, and to sign a gifted deposit letter. This will generally state that they will not require the money back and have no rights over the property.
Do mortgage lenders have any restrictions on who can gift a deposit?
Yes – the restrictions with most lenders are around there being a family relationship between the donor and yourself, but it can be done with a friend if we approach certain lenders.
Is there any paperwork involved when gifting a deposit for a mortgage?
We will need the standard paperwork for the actual applicants, which we’ve mentioned in other episodes. The gift donor needs to supply proof that the savings are there, with three months’ statements plus their ID. We also get a gifted deposit letter drafted up, ready for them to sign, as well.
Can a gifted deposit be used for a Help to Buy mortgage?
Help to Buy is not available anymore – it stopped around three or four years ago. You can still get Forces Help to Buy mortgages if you’re in the armed forces, although that’s set up differently, and isn’t an equity loan on the property. They do allow a gifted deposit for those mortgages [*information correct at the time of recording in February 2026*].
How can a gifted deposit affect the affordability assessment for a mortgage?
It won’t affect affordability when we check the lender’s calculators. But when we go ahead and apply for a Decision in Principle with the lender, it can sometimes lower scoring on the systems they use – and may not fit for the amount that we need.
You’d come to us and go through the process, and we would see how we could help. Hopefully, it wouldn’t affect you too much – it will depend on what your current credit file looks like at the time.
Are there any tax implications for the person gifting the deposit?
We’re not tax advisors, so we’re not allowed to give tax advice to our clients. It does possibly fall into inheritance tax rules, but that would need to be checked with a tax advisor or even HMRC. It might be on the government website, so you could look there for details.
What happens if the person gifting the deposit wants it back at some point?
The idea is that it’s a gift. This is an important part of the lender’s criteria, and why we need a gifted deposit letter. Lenders generally wouldn’t allow it if the deposit had to be paid back. The gifted deposit letter states that it doesn’t have to be repaid – it’s a non-repayable gift.
What else do we need to know about gifted deposits?
As always, if anyone reading this or listening to our episode has any questions, just reach out to us, and we’ll do our best to help you.
Key Takeaways:
- Most mortgage lenders require the gift to be from a close blood relative, such as a brother, sister, mother, or father, although a few lenders may accept a gift from a friend.
- There is no maximum limit or cap on the amount of money that can be gifted for a deposit.
- The gift donor must supply proof of savings building up over the last three months (e.g., three months’ bank statements or proof of an ISA) and their ID.
- The gift must be non-repayable. The donor must sign a gifted deposit letter stating they will not require the money back and have no rights over the property.
- While a gifted deposit does not affect affordability during initial checks, it can sometimes lower the scoring on a lender’s systems when applying for a Decision in Principle.
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.
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How does a gifted deposit work? (Part 2)
Paul Collinson answers more questions about gifted deposits. Episode two of two, recorded in March 2026.
Can a gifted deposit be provided by someone who is not a family member?
Yes. Most lenders only allow a close blood relative to gift a deposit, but a couple of lenders are more relaxed on that – they will allow it to be gifted from a friend. It’s not strictly family members with a couple of lenders.
What precautions should the person gifting the deposit take to protect themselves legally?
They will be asked to sign a gifted deposit letter, saying that it’s a non-repayable gift and that they have no legal interest in the property. The gift donor has to sign this as part of a mortgage application. It cannot be a loan, it has to be a gift.
But if you’re gifting a deposit to your child and they’re buying with a partner, you may want to safeguard that with something called a Declaration of Trust, drawn up by a solicitor. I can’t help with that, as that’s on the legal side. Those are things to check, because each person’s situation is different.
What are the potential risks for the person receiving a gifted deposit for their mortgage?
As long as it is documented properly, most risks are avoided. Everyone just needs to fully understand how it works before applying for the mortgage – that should eradicate some of the risks.
It needs to be purely a gift, not a loan, as otherwise that breaches the lender’s conditions and can have serious implications.
You may also wish to get a Declaration of Trust written, as I mentioned. That would state the gift is specifically for your child, not the partner – and it protects you if the property is bought early on in the relationship between them.
Can a gifted deposit be used for a shared ownership property?
Yes – it’s the same as any other purchase.
How long does the gifted deposit need to be in the giver’s account before it can be used?
There isn’t really a time limit on that. Lenders and solicitors generally go back around three to six months. They mainly want to see an audit trail of the funds.
Sometimes they need proof where the money came from. If it was an inheritance or the sale of property, for example, a gift donor may need to show documentation to explain that.
Do lenders require any documentation to prove the source of a gifted deposit?
The gifted deposit letter is the main thing needed. Some lenders don’t actually ask for that, but we need to ensure we have that for the compliance side. It’s a regulatory requirement. Some lenders won’t ask for it, because they rely on us to do our job properly and satisfy both our obligations and theirs.
What happens if the person gifting the deposit passes away before the mortgage is fully paid off?
If it’s gifted from a friend, it would have already gone through. Most commonly, though, the donor is a parent – which could mean there’s liability for inheritance tax under the seven-year rule.
You would need to get a precise answer on this from a tax advisor, but essentially, you may be liable to pay inheritance tax on that deposit if they pass away within seven years after gifting it.
What types of mortgage products can a gifted deposit be used for?
Any standard mortgage products – mainly residential, but it can also be applied to investment properties like Buy to Lets if required. Some lenders do allow gifted deposits on those.
Can a gifted deposit be used for a remortgage?
It can be. You may want to pay off a second charge or just secure a better rate by bringing the Loan to Value down. Your parents could help you do that if they have the funds and are feeling generous.
What are the advantages and disadvantages of using a gifted deposit for a mortgage?
You get a bigger deposit to help you borrow more, and it also lowers the monthly payments. Basically, it can get you on the property ladder sooner.
There aren’t many disadvantages – just a little extra paperwork. There can be potential family tension if you haven’t kept everyone fully informed. As I mentioned, there could also be potential inheritance tax if the gifter dies in the next seven years, but that’s something you’d check before going ahead.
Do you have anything else you’d like to add, or have we covered everything across our two episodes?
We’ve covered a lot there, but as usual if anyone has a question that’s not answered here or anything pops into your head, just contact us and we’ll be sure to help you.
Key Takeaways:
- A gifted deposit must be purely a non-repayable gift, not a loan, and the donor must sign a letter stating that they have no legal interest in the property.
- While most lenders restrict donors to close blood relatives, a couple of lenders are more flexible and will accept a gifted deposit from a friend.
- If the recipient is buying with a partner, it is recommended that they get a Declaration of Trust drawn up by a solicitor to safeguard the gift.
- Lenders and solicitors generally look back around three to six months to see an audit trail of the gifted funds, and documentation proving the source (such as an inheritance) may be required.
- There is a potential liability for inheritance tax under the seven-year rule if the gift donor passes away within seven years of making the gift.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.
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