A gifted deposit can help make a property purchase possible sooner, particularly for first-time buyers. But lenders and solicitors need to understand exactly where the money has come from and whether it is genuinely a gift rather than a loan that must be repaid.
A gifted deposit does not automatically create a mortgage problem. The important points are who is giving the money, whether there are any conditions attached, how the funds can be evidenced and whether the lender’s own criteria are met.
What is a gifted deposit?
A gifted deposit is money given to you to help fund the deposit on a property purchase. The donor is usually a family member, although the relationships accepted can vary by lender.
For many lenders, the key requirement is that the money is a genuine gift: it is not expected to be repaid and the donor will not acquire a legal interest in the property simply because they provided the funds.
Can my parents give me my whole deposit?
Potentially, yes. Some lenders allow the whole of the applicant’s deposit to be gifted, subject to their criteria and the source of funds being acceptable.
Nationwide’s current published criteria state that there is no maximum acceptable amount for a gifted deposit, provided its conditions are met. Halifax also accepts gifted deposits from eligible family members where the money is not repayable and the donor will have no legal interest in the property after completion.
This does not mean every lender will take the same approach, so the source and size of the gift should be discussed before a full application is made.
Who can provide a gifted deposit?
Parents and grandparents are commonly accepted, but lenders can define acceptable family relationships differently.
Some lenders accept a wider range of relatives, while others are more restrictive. A gift from a friend, employer or another third party may not be acceptable to some lenders even where the funds themselves are legitimate.
If the donor is not an immediate family member, it is particularly important to check the lender’s policy before applying.
What documents might be needed?
MoneyHelper notes that mortgage applications can require proof of deposit, including a completed form from someone who has gifted the money. Depending on the lender and solicitor, you may be asked for:
- a gifted-deposit letter or lender-specific declaration;
- the donor’s full name, address and relationship to you;
- confirmation of the amount being gifted;
- confirmation that the gift is not repayable;
- confirmation that the donor will not own a share of the property;
- bank statements showing the source of the gifted funds; and
- identification and source-of-funds evidence for the donor.
Your conveyancer may also carry out separate anti-money-laundering and source-of-funds checks.
What if the money is coming from overseas?
An overseas gifted deposit can be possible, but additional evidence may be required.
Lenders and solicitors may want a clear audit trail showing where the money originated and how it reached the UK. The country involved, the donor’s relationship to you and the documents available can all affect the process.
It is sensible to raise an overseas gift early rather than waiting until exchange or completion is approaching.
What if my parents borrowed the money to give to me?
This needs to be disclosed.
Some lenders can accept a gift where the donor raised the money through borrowing, provided the applicant is not responsible for repaying the donor’s loan and the lender’s conditions are satisfied. Other lenders may take a different view.
The important point is not to describe borrowed funds as family savings if that is not the true source.
Can the gift actually be a loan from my parents?
A family loan is different from a gifted deposit.
If you are expected to repay the money, the lender needs to know. A repayment commitment can affect affordability, and some lenders will not accept the arrangement at all.
Similarly, if the donor expects a share of the property, a charge over it or another legal right, that should be disclosed before the mortgage application proceeds.
Does a gifted deposit affect how much I can borrow?
The gift itself can improve the loan-to-value by increasing the deposit, which may widen the mortgage options available. But lenders will still assess your income, regular commitments, credit history and overall affordability.
A bigger deposit does not replace the need to demonstrate that the monthly mortgage payments are sustainable.
When should I tell my broker and solicitor?
As early as possible.
Tell your broker at the beginning if any part of the deposit is being gifted, who the donor is, where the money is currently held and whether it has already been transferred to you.
Your solicitor also needs to know because the source of funds must be checked as part of the conveyancing process.
How TLA Finance can help
TLA Finance can review a mortgage application involving a gifted deposit before you make a full application. We can look at the donor relationship, source of funds, deposit size, income, affordability and wider circumstances, then consider lenders whose criteria are potentially compatible.
Visit our mortgage services page or contact TLA Finance to discuss your circumstances.
Important: Mortgage availability and lender criteria can change. Your home may be repossessed if you do not keep up repayments on your mortgage. Tax, legal and inheritance implications can arise when money is gifted; obtain appropriate professional advice where relevant. This article is general information and is not a personal mortgage recommendation.
