Gifted deposit mortgages

Gifted deposits are common in first-time buyer cases. Most major lenders accept them without a problem if the gift comes from a close family member: parents, grandparents, siblings, sometimes aunts and uncles. Gifts from friends or unrelated parties are rarely accepted on residential mortgages.

The gift letter

Lenders require a written gift letter signed by the donor stating:

• That the money is a gift, not a loan.
• That it does not need to be repaid.
• That the donor has no claim on the property.
• The amount and the relationship to the buyer.

The letter is a standard document and your conveyancer or your broker can provide the wording. Some lenders have their own template that they require; we get the right one for your lender.

Source of funds checks on the donor

Lenders verify the donor has the money available legitimately. They typically ask the donor for:

• Three months of bank statements showing the gift sitting in the donor account.
• An explanation of how the money was accumulated if it appeared recently (sale of property, inheritance, retirement lump sum).
• Photo ID and proof of address for anti-money-laundering compliance.

This is standard. Donors should expect to provide it and not take offence; it is not a comment on them, it is a regulatory requirement.

Stamp Duty implications

A gifted deposit does not put the donor on the deeds and does not affect Stamp Duty Land Tax. You alone are on the deeds and you are treated as a first-time buyer if you qualify. The donor pays nothing on the gift unless inheritance tax rules later apply, which is a separate point worth discussing with their tax adviser. As a brief note, gifts above a certain annual allowance can fall back into the donor estate for inheritance tax purposes if they die within seven years; the rules taper after three years.

Mixing gifted with your own savings

Common pattern: 5% own savings plus 5% gifted, totalling 10% deposit. Lenders accept this routinely. The total deposit is what counts for the loan-to-value (LTV) calculation. We pick a lender whose treatment of the mix gives you the most suitable rate.

Worked example on a £280,000 first-time buyer purchase

You have saved £14,000 (5%). Parents are gifting £14,000 (another 5%). Combined deposit £28,000, which is 10% LTV. Borrowing £252,000. Lifting from a 95% to a 90% LTV product typically saves 0.4 to 0.7 percentage points on the rate. On a 25-year mortgage at typical rates, that translates to roughly £55 to £90 a month, or £3,300 to £5,400 over a five-year fix. The gift earns its keep many times over by moving you into a better rate band.

Multiple donors

Most lenders accept gifts from more than one donor on the same purchase, for example £10,000 from each parent. Each donor signs their own gift letter, provides their own statements and ID, and the conveyancer collates the paperwork. A small number of lenders prefer a single donor, so we pick accordingly.

What "gift not loan" actually means

Lenders ask the question because a loan dressed up as a gift is a known fraud pattern. If your parents will, in practice, expect repayment when you are older, a loan is the honest answer. Some lenders accept family loans alongside a deposit, with the loan factored into affordability. The two cases are different products. We will not help you mis-describe a loan as a gift; the loan route is workable on the right lender.

Common pitfalls we see

The donor receiving the gift money from an unexplained source three weeks before transferring it (looks like layering on AML checks). The gift letter signed but mis-dated or naming the wrong property. A donor reluctant to provide statements (this is a regulatory requirement, not optional). All of these can be sorted up front in a five-minute briefing with the donor. We do that briefing.