Gifted Deposit Mortgage

What is a gifted deposit, and how does it work?

A gifted deposit is money given to a homebuyer to cover all or part of their property deposit. It must be a genuine gift and not a loan. The donor who gives the gifted deposit must also have no expectations of repayment or any ownership.

This is confirmed generally through a gifted deposit letter or a declaration signed by the donor, for the lender and solicitor.

Can I use a gifted deposit as a first-time buyer?

Yes, gifted deposits are very commonly used by first-time buyers, mainly because it’s increasingly difficult to save up enough money to get on the property ladder.

What are the mortgage criteria for a gifted deposit? Do all mortgage lenders accept gifted deposits?

Yes, most lenders will consider a gifted deposit, but it does depend on their criteria.

The gifted deposit must be a genuine, non-repayable gift, usually from close family with no future claim on the property for the person gifting it. You will need a signed, gifted deposit letter or declaration, plus proof of the donor’s ID and source of funds.

While most lenders accept gifted deposits, rules vary. Checking with a broker is very important because a ‘close family member’ is defined differently by each lender.

Do I need a gifted deposit letter? If so, what will need to be included in it?

Yes, you will always need a formal gifted deposit letter or declaration. Lenders require it to confirm that the money is a gift and not a loan. It must include details of the donors and recipient, including name, date of birth, the relationship and the amount being gifted.

We also need confirmation that the gift is non-repayable and that the donor will have no claim over the property. Many lenders have their own letter template to complete.

Your broker will provide this to you at the time.

Donors will need to provide bank statements and other documents to solicitors for anti-money laundering checks later on in the process.

Can I only receive gifted deposits from family members?

No, it doesn’t have to come from family, but close relatives such as parents, grandparents or siblings are most commonly accepted. Many lenders limit gifts to close family to ensure that the money is not a loan.

Some do accept gifts from friends or third parties, but usually this involves stricter checks, tighter criteria and more documentation. Lenders need to confirm that the money is a genuine gift.

You will always need a formal gifted deposit letter, and the solicitor will check for anti-money laundering, as well.

Is there a limit on how much can be gifted?

No, there is no financial limit on the amount that can be gifted.

Do you have to pay tax on a gifted deposit?

A gift made by an individual may become exempt from inheritance tax if the donor survives for seven years after making it – but this generally needs to be confirmed. A qualified accountant or tax adviser will be able to explain the tax implications of the type of gift.

What will happen if a gifted deposit is not declared?

Failure to declare a gifted deposit can lead to your mortgage application being rejected and may even constitute mortgage fraud, which is a criminal offence. Lenders and solicitors require full disclosure to comply with anti-money laundering regulations and to ensure that funds are a genuine gift.

How do solicitors check the source of funds?

Solicitors verify gifted deposits by requesting ID, proof of address, and several of the donor’s bank statements to show the origin of the funds and how they have built up.

They may also request documents proving the source, such as the sale of a property or inheritance paperwork, because the gift can come from different sources. Proof will always be needed.

If the funds are coming from abroad, any non-English documents must be professionally translated and notarised, which will involve additional costs. It’s good to be prepared financially for that.