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A gifted deposit is money given to a homebuyer to help cover some or all of the deposit on a mortgage. It’s not a loan, and it must come with no expectation of repayment.
Lenders treat this differently to personal savings or loans, so they’ll need to see a signed declaration from the person gifting the money to confirm it is a genuine gift.
This has become one of the most common ways for first time buyers to move from renting to owning, especially in cases where saving alone wouldn’t be enough to meet the deposit required.
Gifted Deposit Mortgages
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Who Can Gift a Mortgage Deposit?
In most cases, gifted deposits come from close family members such as parents or grandparents.
These are widely accepted by lenders. Gifts from siblings or other relatives are sometimes allowed, depending on the lender.
Some lenders may not accept gifts from friends or non-relatives at all, or they may ask for additional evidence to assess the relationship and motivation behind the gift.
Everyone’s situation is different, so it’s important to speak to a mortgage broker if your deposit is coming from someone outside the usual family network.
What Does the Gifter Need to Provide?
The person giving the deposit will need to write a gifted deposit letter.
This confirms that the money is a gift, not a loan, and that they have no legal or financial interest in the property being purchased.
Alongside the letter, lenders will also ask for:
- Proof of the gifter’s identity (such as a passport or driving licence)
- Evidence of where the funds have come from (such as bank statements)
These checks are in place to meet anti-money laundering rules and ensure everything is above board.
How Much Can Be Gifted?
There’s no set limit to how much money can be gifted. In some cases, a family member may contribute a small top-up to help meet the minimum deposit. In others, they might cover the full amount.
As long as the funds are gifted and not loaned, and the rest of your application is affordable and realistic, most lenders will be happy to consider the deposit as part of your mortgage application.
Just keep in mind that while a gifted deposit may help with upfront costs, it doesn’t change the other affordability checks. Lenders will still assess your income, credit history and monthly outgoings as normal.
Can Gifted Deposits Be Used with Any Mortgage?
Gifted deposits are common with first time buyer mortgages, but they can also be used when moving home, buying a shared ownership property, or purchasing a new build.
Some schemes and developers may have additional rules, so if you’re using a specific product or scheme, it’s worth checking whether they have limits on where the deposit funds can come from.
A mortgage advisor can help you find a lender that accepts gifted deposits for your particular property type and deposit level.
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Are There Any Risks?
For the buyer, a gifted deposit usually makes the home buying process more achievable. For the person gifting the money, there are a few things to consider:
- If the money is coming from retirement savings or pension funds, it may affect their future plans
- Some people choose to “fast forward” inheritance by gifting early, but it’s worth considering any financial consequences or tax implications
- Once gifted, the money is no longer theirs. If relationships change, they won’t have any legal claim to it or the property
It’s always worth having open conversations as a family before gifting money towards a property. A clear paper trail and agreement upfront can avoid issues later.
How We Can Help
At UK Moneyman, we help buyers use gifted deposits every day.
Whether you’re getting a contribution from a parent, a grandparent or someone else, we’ll guide you through the paperwork, match you with a lender that accepts it, and handle the application from start to finish.
Using a gifted deposit properly can make a big difference to your chances of buying a home. Our mortgage advisors are here to make sure nothing gets missed and everything goes smoothly.
If you’re looking at your options with gifted deposit mortgages, get in touch today and we’ll help you get started.
