Saving for a mortgage deposit can be a big challenge when buying a home. Many people wonder if they can use a gifted deposit that is, money given to them by another person to help with their mortgage.
The good news is that gifted deposits are often accepted by UK mortgage lenders. However, important rules and eligibility requirements must be followed.
This guide explains how gifted deposits work for different types of mortgages, including residential and buy-to-let mortgages. It also covers fixed and variable-rate products, the documents lenders may require and practical examples to help you understand what to expect.
What Is a Gifted Deposit?
A gifted deposit is a sum of money given to a homebuyer by another person, usually a family member, to help with purchasing a property.
Unlike a loan, a genuine gifted deposit does not normally need to be repaid. The person providing the gift should not expect to own part of the property or place conditions on how the money is repaid.
Using a gifted deposit can make it easier to afford a home and may help you access a wider range of mortgage options.
Your deposit size directly affects your loan-to-value ratio, commonly known as LTV. A larger deposit normally means you need to borrow a smaller percentage of the property’s value.
Can Gifted Deposits Be Used for All Types of UK Mortgages?
Gifted deposits may be accepted for residential and buy-to-let mortgages, but the rules vary considerably between lenders.
Some lenders only accept gifts from specific family members. Others may consider a wider range of donors, provided that the money is an unconditional gift.
For example, Halifax states that it accepts genuine gifts from defined family members but does not accept gifts from friends. Nationwide states that a gifted deposit may be acceptable when no conditions are attached. This demonstrates why lender criteria must be checked before applying.
Gifted Deposit Mortgage Comparison
| Mortgage Type | Can a Gifted Deposit Be Used? | Common Requirements |
|---|---|---|
| Residential mortgage | Commonly accepted | Gift letter, donor identification and proof of funds |
| First-time buyer mortgage | Commonly accepted | Donor relationship and confirmation that repayment is not required |
| Fixed-rate mortgage | Usually possible | Standard gifted-deposit and affordability checks |
| Variable-rate mortgage | Usually possible | Standard gifted-deposit and affordability checks |
| Buy-to-let mortgage | Possible with selected lenders | Stricter donor, source-of-funds and deposit requirements |
| Limited company buy-to-let | Lender-specific | The gift may need to be made to the director rather than directly to the company |
Residential Mortgages
For people buying a home to live in, gifted deposits are commonly accepted. Most lenders understand that financial support from family can help buyers enter the property market.
Key Points
- The gift giver will normally need to provide a signed gifted-deposit letter.
- The letter should confirm that the money is a gift and does not need to be repaid.
- The donor should normally confirm that they will not have any legal or financial interest in the property.
- Lenders or solicitors may request bank statements showing where the money came from.
- The donor’s relationship with the borrower must meet the lender’s eligibility rules.
- Gifts from friends, employers or other third parties may not be accepted by every lender.
Halifax, for example, requires a gifted-deposit letter containing the donor’s details, their relationship with the applicant, the amount being gifted and confirmation that the gift is not repayable. It may also request bank statements or other evidence showing that the funds are available.
Buy-to-Let Mortgages
Using gifted deposits for buy-to-let mortgages is less straightforward, but it may still be possible.
Some buy-to-let lenders accept gifted deposits, although their requirements may be stricter because the property is being purchased as an investment.
For example, The Mortgage Works accepts certain gifted deposits but applies conditions relating to the donor, the number of gifts and whether the donor or funds are based overseas.
Possible Buy-to-Let Requirements
- The gifted deposit may need to be transferred to the applicant personally.
- A formal gifted-deposit declaration may be required.
- The lender may restrict who is allowed to provide the gift.
- The lender may limit the number of separate gifts used.
- Overseas gifts or funds may not be accepted.
- The applicant may need to provide additional bank statements and an audit trail.
- The property must still meet the lender’s rental affordability and loan-to-value requirements.
For limited company buy-to-let applications, some lenders may accept a gift made to a director but not a gift made directly to the company.
Fixed and Variable-Rate Mortgages
Using a gifted deposit does not usually determine whether you must choose a fixed or variable-rate mortgage.
The lender’s main focus will normally be:
- Whether the gifted deposit meets its criteria
- Whether the source of the money can be verified
- Whether the mortgage is affordable
- The property’s value
- The total deposit
- Your resulting loan-to-value ratio
- Your credit history and wider financial circumstances
Fixed-Rate Mortgages
With a fixed-rate mortgage, the interest rate remains fixed for an agreed period, such as two, three or five years.
A gifted deposit may help you reach a lower LTV band, which could provide access to different fixed-rate products.
Variable-Rate Mortgages
With a variable-rate mortgage, your interest rate and monthly payments can change.
A gifted deposit can still reduce your LTV, but the mortgage rate may change during the product term.
What Do UK Mortgage Lenders Require for Gifted Deposits?
The exact documents vary by lender, but applicants are commonly asked to provide a gifted-deposit letter and evidence showing where the funds originated.
Gifted-Deposit Letter
A gifted-deposit letter should usually include:
- The donor’s full name and address
- The borrower’s full name
- The amount being gifted
- The property address, where known
- The relationship between the donor and borrower
- The source of the money
- Confirmation that the money is a gift rather than a loan
- Confirmation that repayment is not expected
- Confirmation that the donor will not own any part of the property
- The donor’s signature and the date
A lender may provide its own gifted-deposit form or template. Applicants should use the lender’s form where one is required.
Proof of Source of Funds
Lenders and conveyancers need to establish that the gifted money comes from a legitimate source.
Common forms of evidence include:
- The donor’s bank statements
- A savings account statement
- Evidence of an investment being sold
- Probate or inheritance documents
- A property completion statement
- Evidence showing the transfer into the buyer’s account
- Identification and address documents for the donor
Nationwide’s current criteria show that the amount, donor location and origin of the funds can affect the documents required.
Timing of the Gift
The required timing varies between lenders and conveyancers.
Some may allow the money to remain in the donor’s account until it is sent to the solicitor. Others may want evidence showing that it has already been transferred to the buyer.
Do not transfer a large gifted deposit without first checking the requirements with your mortgage adviser and conveyancer.
Moving the money between several accounts can make the source-of-funds checks more complicated.
Illustrative Example 1: First-Time Buyers Using a Gifted Deposit
Emma and Jake are buying their first home.
They have saved £5,000 but need a total deposit of £15,000. Emma’s parents agree to gift them the remaining £10,000.
Emma’s parents provide a signed gifted-deposit letter confirming that:
- The £10,000 is an unconditional gift.
- It will not need to be repaid.
- They will not own any part of the property.
- They will not place a charge against the property.
They also provide bank statements showing where the £10,000 came from and evidence of the transfer.
Because the gifted deposit increases Emma and Jake’s total deposit, it reduces the amount they need to borrow and improves their LTV.
The mortgage remains subject to affordability, credit checks and the lender’s full criteria.
Illustrative Example 2: Buy-to-Let Investor Using a Gifted Deposit
Sarah wants to buy a small flat to rent out. A family member offers £20,000 towards her deposit.
Before submitting the application, Sarah’s mortgage adviser checks which buy-to-let lenders will accept:
- A gift from that particular family member
- The proposed deposit amount
- The source of the money
- Sarah’s chosen ownership structure
- The required loan-to-value ratio
The selected lender requests a formal gifted-deposit declaration, proof of the donor’s funds and evidence of the transfer.
Sarah also needs to satisfy the lender’s buy-to-let rental affordability calculation and wider eligibility requirements.
Are There Any Risks or Things to Watch For?
Gifted deposits can be helpful, but poor preparation may delay or disrupt a mortgage application.
Important points include:
- A lender may reject the deposit if it is actually a loan.
- The donor should not expect regular repayments.
- Informal repayment arrangements must be disclosed.
- Not every lender accepts gifts from friends or extended family.
- Overseas gifts may involve additional checks or may not be accepted.
- Large gifts can require more detailed source-of-funds evidence.
- The donor may need to provide personal financial documents.
- The gift could affect the donor’s future financial position.
- Tax considerations may apply depending on the donor’s estate and circumstances.
A cash gift used towards a deposit does not normally replace the buyer’s responsibility to pay any Stamp Duty Land Tax due on the property purchase.
Inheritance Tax may become relevant to the donor’s estate if they die within seven years of making certain gifts. The tax treatment depends on the value of the donor’s estate, available exemptions, previous gifts and other circumstances.
Anyone concerned about tax implications should speak to a qualified tax adviser or solicitor.
What if the Gifted Deposit Is Partial?
You do not need to receive your entire mortgage deposit as a gift.
Many buyers combine personal savings with a gifted deposit to reach the required amount.
For example, a 15% deposit on a £300,000 home would be £45,000.
The deposit could consist of:
- £25,000 from the buyer’s savings
- £20,000 from an acceptable gifted deposit
- Total deposit: £45,000
The lender will normally need evidence for both the buyer’s savings and the gifted funds.
Gifted Deposit Checklist
Before submitting your mortgage application, check that:
- The proposed donor is acceptable to the lender.
- The money is a genuine gift rather than a loan.
- The donor does not expect an interest in the property.
- The gift letter contains all required information.
- Bank statements clearly show the source of the funds.
- Overseas funds meet the lender’s criteria.
- The transfer timing has been agreed with the lender and conveyancer.
- You have kept copies of every relevant document.
- Your remaining mortgage application meets affordability and credit requirements.
Final Thoughts
Gifted deposits are a useful way to help buyers get onto the property ladder or increase the deposit available for a property purchase.
However, acceptance is not automatic. Every lender has its own rules covering eligible donors, documentation, overseas funds and whether gifted deposits can be used for buy-to-let mortgages.
Understanding requirements such as the gifted-deposit letter and proof of funds can help streamline your mortgage application and reduce avoidable delays.
Ready to Use a Gifted Deposit Towards Your Mortgage?
Talk to the experts at BSL Financials today.
We can answer your questions and help you explore mortgage options that suit your circumstances—whether you are purchasing your first home, moving home or considering a buy-to-let investment.
The right lender will depend on who is providing the gift, where the money came from and your wider financial circumstances.
This post is for informational purposes and does not constitute regulated financial, legal or tax advice. Mortgage availability is subject to eligibility, affordability, lender criteria and property assessment. Always consult a qualified mortgage adviser for personalised guidance.
