Gifted deposits

Saving for a mortgage deposit can take a long time – you’ll need a chunk of the overall home value, which can be tens of thousands. A gifted deposit can help you to get on the property ladder with help from your parents or family.

Most mortgage lenders will allow you to use a gifted deposit, but they will want to see evidence that the money doesn’t need to be paid back. They will also want to know your relationship to the person who is giving the money and if they can afford to give it.

A lender will also look at the rest of your finances to understand if you can afford to repay a mortgage.

You’ll need to follow some standard rules when using a gifted deposit:

• The deposit must be a gift and not a loan. This means you’ll need it in writing that you don’t have to pay the money back. You’ll also need the person who sent the gift to agree they have no stake in the property
• Inheritance tax may be charged if the person giving the deposit dies within seven years
• Some lenders have strict rules about who can gift a deposit, so check these before you apply

The person giving the gift must always provide a gifted deposit letter to a mortgage lender.

It needs to include:

• Their name
• Your name
• The total amount given
• A statement that it is a gift
• A statement that the gift has no commercial interest
• Confirmation that the gift giver has no stake in the property
• Confirmation that the gift giver can afford to give you the money

This letter should then be signed by an independent witness and given to your solicitor. The letter is then submitted along with your mortgage application.

All lenders have their own rules about who can and can’t give a gifted deposit.

The gift giver will also need to provide the following personal documents to comply with anti-money laundering laws:

• Proof of address
• Bank statements
• Photo ID

There are a few rules to be aware of when it comes to gifted deposits. These include:

• The gifter must agree to have no claim over the property and not want any of the money to be repaid
• If the gifted deposit is the result of inheritance, you might need to provide a copy of the will
• A gifted deposit doesn't have to make up all your deposit. You can use a gift along with your own savings

Each lender will have their own rules around gifted deposits so it's always worth checking before applying.

If the deposit gifter dies within seven years of the money being gifted, inheritance tax may be charged on the money. This depends on how big their estate is at the time they pass away.

You can also accept the money in instalments of £3,000 every year. That’s the limit at which you won’t pay tax on cash gifts.