Gifted Deposits

What is a gifted deposit?

A gifted deposit is a sum of money that’s given to you as a gift, usually by a close relative, to help you buy a property. You can either use it as your full deposit or add it to your savings to benefit from a larger deposit. The person giving it to you needs to understand that it isn’t a loan, so you won’t be expected to pay it back. If you’re given a loaned deposit rather than a gifted one, the lender will view it differently. It will count as a financial commitment, which will affect your affordability. The person gifting you the deposit also won’t be named on the mortgage application or deeds. This means that they won’t have any legal claim over your property. The lender will require acknowledgement of both of these to be confirmed in writing as well as details of where the money has come from.

How does a gifted deposit work?

There are various ways a deposit can be gifted to you. For example, the gift-giver may have savings or they may choose to withdraw funds from their pension. They may have sold a property or another asset or they may have inherited the money. Another example is that they may have built up equity in their property. In this case, they can remortgage to release the funds and use them to gift you a deposit. Wherever the funds are coming from, they need to provide proof for the lender, which we’ll detail later in this guide.

As mentioned above, the funds must be given as a gift, not a loan. A declaration letter will be required, confirming that the person who has given it to you does not expect it to be repaid. Signing this letter will also confirm their acceptance that they have no rights over your property. They will also have to provide proof of identification, such as a driving licence or passport, and proof of address.

There’s no minimum or maximum requirement for how much can be gifted as a deposit. Depending on the lender, you can either use the gifted deposit as your entire deposit or use it to increase the deposit amount you pay by adding it to your savings. For the latter option, you must declare that part of your deposit is gifted and confirm the amount. Lenders have to check the sources of gifted deposits and carry out anti-money laundering checks.

Some lenders may require that you pay a certain percentage of the deposit yourself in addition to the gifted deposit. For example, you may be expected to pay 5% of the deposit using your own money. This is usually in specific circumstances, though, such as if you’ve had credit issues.

Boost your affordability with a bigger deposit

If you’ve been able to save some funds for a deposit yourself, this can boost your mortgage affordability. For example, you may already have saved a 5% deposit and can then add this to a 5% gifted deposit. Having a 10% deposit reduces the risk for the lender, allowing you access to more deals and better rates. This means that you can benefit from lower monthly mortgage payments. 

Who can give you a gifted deposit?

Gifted deposits are becoming increasingly popular as prospective homeowners struggle to save and secure a mortgage. Typically, gifted deposits have been given by parents to their children (the Bank of Mum and Dad) or grandparents to their grandchildren. However, the reverse of this – children giving their parents a gifted deposit – is also increasing in popularity.

Lenders have different criteria for who can provide gifted deposits and will need confirmation of your relationship to the person who is gifting you the money. Most lenders accept gifted deposits from immediate family members, such as parents, grandparents and siblings. Some lenders, however, only allow parents to gift the deposit.

Other gifted deposit mortgage lenders are more flexible, considering more distant family members, provided that they are blood relatives, as well as partners and friends. Just be aware that, in these cases, lenders may have to carry out further checks. This is because there is an increased risk. As these checks are more detailed, they can slow down the mortgage process. Before accepting a gifted deposit, speak with our mortgage brokers because they can check the relevant lender’s requirements for this.   

Vendor gifted deposit

The person selling you the property may offer you a discount on the purchase price, which can, in effect, be used as your deposit. This can be classed as a vendor gifted deposit. This is rare but could occur if you’re buying the property from a parent or other family member, for example. Most lenders don’t accept vendor gifted deposits. Lenders who do accept them may require you to add your own funds to the deposit, too.

Builders gifted deposit

A homebuilder or developer may offer you a discount on the purchase price to use as a gifted deposit. This is usually offered as an incentive to buy their new-build property. Many lenders accept these but the original property price before the homebuilder or developer has offered you a discount must be the genuine market value. As with a vendor gifted deposit, the lender may require you to contribute your own funds to the deposit as well.

Landlord gifted deposit

When you’re renting a property and the landlord has offered it to you at a discounted purchase price, the savings you make can count as a deposit contribution. This is classed as a landlord gifted deposit. The original asking price before the discount must be the genuine market value and you may also have to add to the deposit from your own funds. Some lenders may stipulate other criteria too, such as the landlord being an immediate family member.

Do you have to declare a gifted deposit?

It’s essential that you tell your lender as well as your solicitor that some or all of your deposit has been gifted to you. This is because they have to carry out standard anti-money laundering checks. The person gifting the deposit to you will need to provide proof of where the funds have come from.

For example, they may have gradually grown their savings and so need to provide statements for the savings account and possibly proof of where the money came from in the first place. Or they may have sold a property or asset and need to provide proof of the sale. Additional documentation may be required if the funds have been gifted from someone living outside the UK or if the funds have been held outside the UK.

It’s important to check that the gifted deposit has come from one of the lender’s approved sources. Not all lenders accept all sources. For example, a lender may be happy to accept a gifted deposit from a blood relative. They may not, however, agree to a deposit that has been gifted from an aunt or uncle who isn’t related by blood. Another example is that a lender may be willing to accept a gifted deposit from an immediate family member but not from a cousin, a family friend or an employer.

It must be a gift, not a loan

The nature of a gifted deposit means that it must be given to you as a true gift. The person gifting it to you mustn’t have any expectation of you repaying it at any time. A loan, on the other hand, is considered an expense and, as such, is included in your affordability calculations as one of your outgoings. Therefore, you need to make sure the lender is aware that you have a gifted deposit and its amount. The person gifting you the deposit must also understand that they won’t be named on the mortgage or deeds and, therefore, won’t have any claim over your property. A gifted deposit letter or declaration will need to be completed, which we’ll detail below.

What happens if you don’t declare a gifted deposit?

If you don’t declare a gifted deposit, there can be serious consequences. For a start, your mortgage application may be rejected. This is because the lender needs to know the amount that’s gifted, confirmation that it’s not being given to you as a loan, who has gifted you the deposit and where that money has come from.

Your solicitor is obligated to report anything suspicious. As such, if they find that you have a gifted deposit that wasn’t declared, this may have to be reported. Dealing with this can be complicated and lead to delays. Your purchase may even fall through as a result.

By not declaring a gifted deposit, it can also be considered to be mortgage fraud. This carries severe penalties as a criminal offence, including fines and imprisonment.

What is a gifted deposit letter?

When using a gifted deposit, the lender needs proof that the funds have genuinely been gifted. They also need confirmation that the person gifting the deposit doesn’t expect you to repay them. Therefore, a gifted deposit letter – also called a gifted deposit declaration – must be completed and signed by both you and the person providing the gifted deposit. This letter needs to include:

• Your name, as the person receiving the gifted deposit, and your address
• Their name, as the person gifting you the deposit, and their address
• Their relationship to you
• The value of the gifted deposit
• The source of the funds
• Confirmation that the money is given as a gift, not a loan, and that the person giving it to you doesn’t expect repayment
• Confirmation that the person providing the gifted deposit understands they have no claim over your property
• Evidence that the person gifting you the money is financially stable

Lenders usually have a gifted deposit declaration form that you can complete and sign. If not, you can provide them with a signed and certified letter. Lenders have different criteria for these so check with our mortgage brokers first to ensure that your letter contains the required information.

Other requirements when using a gifted deposit

In order to comply with anti-money laundering checks, the person gifting you the deposit will need to provide personal documentation. For example, photo ID, such as a passport or driving licence, and two forms of proof of their address, such as a utility bill and a bank statement.

As mentioned earlier, they also need to provide proof of where the funds have come from. This is also for anti-money laundering purposes. The proof can be a copy of a will if they inherited the money, proof of a sale if they’ve sold a property or other asset, payslips or bank statements, depending on where the funds have come from. Your solicitor can help you with this to ensure that you have the correct documentation. You may also need to provide proof that the funds have been transferred to you, such as a bank statement.

Do you need a declaration of trust?

A gifted deposit is a substantial sum of money and, as such, it needs to be protected. This can be done with a declaration of trust, which can be drawn up by your solicitor. Also known as a deed of trust, it’s a legally binding document that specifies what happens with a gifted deposit in certain situations.

For example, you may buy a property with a partner and your parents have gifted you a deposit. A declaration of trust can clarify that if you split up in the future, the deposit was gifted to you alone rather than to both of you as a couple. This protects your interests if an unforeseen situation occurs. Another example is to confirm the financial situation if the property is sold. 

The pros and cons of having a gifted deposit

There are various advantages and disadvantages to using a gifted deposit when buying a home.

Pros

• Get on the property ladder sooner. It can be hard to save a deposit so having a gifted deposit enables you to buy a home much sooner than if you had to save a large sum yourself.
• Increase your deposit size and borrow less. If you have already saved a deposit, adding a gifted deposit to it increases what you can put down and lowers the amount you need to borrow. With a lower loan-to-value (LTV) ratio, you can have access to better interest rates.
• Improves the approval process. The more deposit you can pay, the lower the risk to the lender. If you have a large gifted deposit or can add your own savings to it, the lender may be more flexible with their approval process. For example, if you have a complex income or a low credit score.
• Increase your borrowing potential. You may have seen a property that’s out of your price range when buying without any help. By adding a gifted deposit to your savings, however, the larger deposit increases your affordability for a more expensive home.
• No legal financial tie. As this type of deposit is gifted, there is no expectation from the person who has gifted it to you of being repaid. There is no legal financial obligation between you.
• A tax-free way to help you. The person gifting you the deposit may be able to do so tax-free.

Cons

• Reduces your accessibility to lenders. Not every lender accepts a gifted deposit. As such, this shrinks the pool of lenders you have to choose from and, in turn, the range of mortgage deals.
• Inheritance tax implications. Your gifted deposit may be subject to inheritance tax if the person who gifted it to you dies within 7 years of doing so.
• A strain on the relationship. Whilst there may be initial good intentions when someone gifts you a deposit, things change and your relationship may become strained in the future. For example, if they suddenly need the money, they may resent you for not paying it back, even though it was explicitly given as a gift.

Can first-time buyers use gifted deposits?

One of the biggest hurdles preventing first-time buyers from getting on the property ladder is the inability to save a large enough deposit, if anything at all. Increasingly, they need a helping hand to buy a home and this often falls to the Bank of Mum and Dad. One way a parent can help their child is with a gifted deposit. This type of help removes any pressure of repayment for a first-time buyer as it must be given as a true gift. That way, they have a deposit to satisfy the lender’s requirements, are reducing the LTV compared with a 100% mortgage and can concentrate on budgeting for their monthly mortgage payments and additional costs that come with owning their first home.

Can you use a gifted deposit if you’re self-employed?

If you’re self-employed, you can use a gifted deposit for your mortgage, although you may find it more challenging. As the nature of a self-employed income can be complex, some lenders view this as more of a risk. This makes the affordability criteria for a self-employed mortgage stricter than for a standard mortgage. If you’re able to contribute some extra funds towards the gifted deposit, this will remove some of the risk for lenders. Let our mortgage brokers know if you’re thinking of using a gifted deposit. They know which lenders offer more flexibility when it comes to a self-employed application and a gifted deposit. This will make finding the right mortgage deal easier for you.  

Can you use a gifted deposit if you have bad credit?

The stronger your credit score, the better your chances of a successful mortgage application. However, if you have a low credit score or bad credit, there are lenders who are willing to consider applications that include a gifted deposit. They may limit the amount they’re prepared to lend you, insist on a specific deposit amount and charge you a higher interest rate, though. This is to counteract the extra risk they’re taking on.

It’s recommended to improve your credit score before applying and our mortgage brokers can guide you on ways to do this. It’s also better to put your own money towards the deposit along with the funds that have been gifted to you. The higher the deposit amount you can put down, the lower the risk for the lender and the more likely they are to approve your application.

Are there any tax implications with a gifted deposit?

Gifted deposits are usually tax-free. However, there are some circumstances in which inheritance tax may become payable. Everyone is entitled to give an annual tax-free gift allowance of up to £3,000. This allowance can be carried over to the next year if it hasn’t been used. This means that the person gifting you the deposit can give you up to £6,000 without being taxed on it. If a couple are gifting you the deposit, such as both parents, this means they can give you up to £12,000 without being liable for tax, assuming they haven’t used the previous year’s allowance.

If more than the allowance is gifted, it becomes a potentially exempt transfer (PET). Whilst it’s initially tax-free, it may be subject to inheritance tax in the future. This would apply if the person gifting it to you passes away within 7 years. If this happens and their estate is worth over £325,000, inheritance tax becomes payable on the value of the estate over £325,000. This tax is charged at a rate of 40%.

Alternatives to gifted deposits

There are several alternatives to consider if a gifted deposit isn’t right for you or your circumstances, as detailed below.

A loan from a family member or friend

Not everyone is in a position to gift money but a family member or friend may be able to lend you some money, knowing that you’ll pay it back. Just be aware that you need to declare this to the lender as a loan affects your affordability for a mortgage. It’s taken into account as an outstanding debt and impacts how much you can borrow.

Guarantor mortgage

With a guarantor mortgage, the person wishing to help you agrees to guarantee your mortgage payments if you’re unable to make them. They need to provide the lender with security, such as their property or savings. This is a big commitment and puts their property or savings at risk should you default on your mortgage. As such, they need to take independent legal advice before committing to the role of guarantor.

For you, having a guarantor gives you the ability to pass the affordability checks when you might have struggled to before. This is particularly helpful if you have no deposit or a small one, a low or irregular income, a low credit score, no credit history, bad credit or want to buy a property that’s out of your price range.

Joint mortgage

As its name implies, you can take out a joint mortgage with the person who wishes to help you buy a property. Each person’s earnings are taken into account, boosting your affordability. You are both named on the mortgage so you are both jointly liable for the mortgage payments. You’re also both named on the deeds so you become legal owners of the property.

You don’t, however, have to own equal shares of the property. This means that if, for example, the other person pays more deposit than you or covers the entire deposit, you may both agree that they can own a bigger share of the property to make it a fairer arrangement. In this case, your solicitor can draw up a deed of trust to confirm this.

The downside to a joint mortgage is that if the other person is already a homeowner, they’ll be liable for the additional property stamp duty surcharge.

Joint borrower sole proprietor mortgage

A joint borrower sole proprietor mortgage (JBSP) allows you to take out a mortgage with another borrower but have sole ownership of your home. For the other person, this arrangement means they can avoid being penalised with the stamp duty surcharge if they’re already a homeowner. As you’re both named on the mortgage, you’re both jointly liable for the mortgage payments.

Combining your incomes increases your affordability and borrowing potential, which is ideal if you have a low or irregular income. If you have saved a deposit, you can combine it with the other person’s to put down a larger sum. In the future, when you’re in a position to take over the mortgage payments on your own, the other person can be released from the JBSP mortgage arrangement.  

Family springboard mortgage

Another way for a family member to help you if you have a low deposit or none at all is with a family springboard mortgage. They place a sum of money, which is usually 10% of the property’s value, into a savings account that’s linked to the mortgage. Lenders generally accept these funds in place of a deposit, making it ideal if you haven’t been able to save one.

The funds are held for a set term, such as 5 years, and interest is earned on them during this time. This arrangement allows your family member to help you out financially while only tying up their funds for a short period. They just need to be aware that they won’t be able to access these funds while they are held. Assuming that you don’t miss any mortgage repayments, the funds and accumulated interest are returned to your family member at the end of the set term.

You are the only person named on the mortgage and property deeds with this arrangement. This allows you to enjoy sole ownership of your home. For your family member, it means that they don’t have to make any mortgage payments or worry about being penalised with a stamp duty surcharge.

Shared ownership

Shared ownership provides an affordable way to buy a home that meets your needs when you cannot afford the deposit and mortgage requirements to do so otherwise. With this government-backed scheme, you buy a share in the property – usually between 25% and 75% – and pay rent at a discounted rate for the remaining share. You need a minimum deposit of 5% but as this is based on the share you’re buying rather than the property price as a whole, this makes it much more affordable. As your mortgage is based on the share you’re buying too, it’s easier to pass the lender’s affordability checks.

Gifted deposits are accepted for shared ownership properties. However, if you don’t have a gifted deposit or any other form of financial help available, shared ownership is worth considering. Further down the line, when you’re in a financial position to do so, you can increase your share of the property.

First Homes scheme

The First Homes scheme, available in England, is designed to help first-time buyers get on the property ladder. It does this by providing a discount of at least 30% on new-build properties. Property prices are capped at £250,000 after the discount outside of London or £420,000 in London. You need to pay a 5% deposit and arrange a mortgage for at least 50% of the discounted purchase price. The lower price makes it easier to save a deposit and pass the lender’s affordability checks. You must have a maximum income of £80,000 to be eligible, or up to £90,000 in London.

Key workers are prioritised under this scheme, enabling them to buy more affordable homes in the area where they work. Also prioritised are those serving in the armed forces and recent veterans. They don’t need to meet any local connection criteria that have been set by the local councils.

Deposit Unlock

The Deposit Unlock scheme is available to first-time buyers looking to get on the property ladder and existing homeowners who want to move up it. It enables you to buy a new-build home with just a 5% deposit. Maximum loans of £750,000 are available and lenders participating in the scheme offer competitive interest rates for their 95% mortgages.

This scheme is a collaboration between lenders and the home building industry, aiming to encourage more people to buy new-build homes. Participating home builders pay lenders mortgage insurance to lower the risk that comes with new builds. New builds are sold at a premium price, which means lenders have stricter mortgage criteria, making it harder for buyers. As the risk is lowered with this scheme, however, lenders can offer 95% mortgages with competitive rates for affordable deals.

Freedom to Buy

Freedom to Buy is a government-backed scheme launched in July 2025 to replace the 95% mortgage guarantee scheme, which ended in June 2025. This permanent mortgage guarantee scheme enables first-time buyers and home movers to buy a home with just a 5% deposit. To encourage lenders to participate, the government insures them against potential losses on 91–95% loan-to-value (LTV) mortgages. As they’re risk is reduced, they can offer higher LTV mortgages, giving more prospective buyers the opportunity to take advantage of a low-deposit mortgage solution.

Lifetime ISA

A Lifetime ISA (LISA) enables you to save up for a deposit for your first home with a helping hand from the government. With this tax-free scheme, you can save up to £4,000 annually and the government adds 25% to whatever you’ve invested for that year. This means that each year, if you invest the maximum amount, you can receive an extra £1,000 tax-free from the government. This helps to build up your deposit fund much quicker than leaving your money in a savings account.

A LISA can be opened between the ages of 18 and 40. You must have a LISA account for at least a year to be eligible for the government bonus and you can save in the account until you reach 50. The property you purchase with the funds must be in the UK and used as your home. It can have a maximum value of £450,000 and you need to use a mortgage to fund its purchase.

We can arrange your gifted deposit mortgage

Saving an adequate deposit, if any at all, to buy a home is challenging and frustrating. It’s the biggest stumbling block when it comes to buying a home and leaves aspiring homeowners either stuck living at home with family members for years longer than they wish to or renting accommodation with seemingly no way to secure a mortgage. Family members often wish to help their loved ones out of this situation but, usually as homeowners themselves, aren’t prepared to be named on a mortgage or property deeds. With a gifted deposit, however, a solution is given to both parties. Family members can gift a lump sum to their loved ones to use as a deposit with no strings attached. Aspiring homeowners finally have the means to get on the property ladder and buy a home.

At Trinity Finance, our mortgage brokers are here to answer any queries you have about gifted deposits. If you’ve already received one, they can go through the gifted deposit requirements with you to meet different lenders’ acceptance terms. Depending on the source of the gifted deposit and your circumstances, they can approach relevant lenders accordingly to access the best gifted deposit mortgage deals for you.

Just give us a call on 01322 907 000 and our expert brokers will be happy to discuss gifted deposits with you, including their benefits, the implications and the requirements for using them. If you prefer, send us an email at info@trinityfinance.co.uk or an enquiry via our contact form. One of our mortgage brokers will reply to you as quickly as possible with more information on how to use your gifted deposit.