Gifted mortgage deposits: what makes it a gift, and what paperwork might you need?

A deposit for a first home does not always come entirely from the buyer’s own savings. Parents, grandparents or another family member may want to help. That can be a useful contribution, but it is worth understanding what the mortgage lender and conveyancer need to see before the money moves.

The important distinction is not simply who provided the money . It is whether the money is genuinely a gift, whether anyone expects it to be repaid, and whether the person providing it expects any interest in the property.

A gift is different from a loan

With a gifted deposit, the donor normally confirms that the money is being given without an expectation of repayment and that they will not acquire an ownership interest in the home.

If the money must be repaid, it is a loan rather than a gift. That matters because a commitment to repay can affect affordability and because different lenders have different policies on borrowed deposits.

It is better to explain the arrangement accurately at the outset than to call it a gift just because that seems simpler. The lender and conveyancer need to understand what has actually been agreed.

Who can give a mortgage deposit?

Many lenders have provisions for gifts from close family members, but accepted relationships and conditions vary. Some lenders may consider gifts from other people, subject to additional checks or restrictions.

Do not assume that a gift is acceptable to a particular lender because somebody else has used one. The useful question is whether the proposed arrangement meets that lender’s current criteria for the application and property.

If the gift comes from overseas, involves somebody who will live at the property, or has conditions attached, raise that early. Those details can affect the evidence needed and which lenders may be suitable.

What paperwork might be requested?

Requirements differ between lenders and conveyancers, but prepare for some or all of the following:

• A gifted deposit declaration or letter. This commonly confirms the amount, the donor’s relationship to the buyer, that no repayment is expected and that the donor will not claim an interest in the property.
• Evidence of the donor’s identity. The conveyancer may need to verify who is providing the funds.
• Evidence showing where the money came from. Bank statements and potentially other documents may be requested as part of source-of-funds checks.
• A clear record of the transfer. The date, amount and accounts involved may need to match the paperwork.

These are different checks. A signed gift letter does not necessarily replace the conveyancer’s obligation to understand the source of funds. Share sensitive documents only through the secure process requested by the relevant professional.

When should you tell the lender and conveyancer?

Ideally, as soon as you know that part of the deposit will be gifted.

The lender may require a particular declaration. The conveyancer will also have checks to complete. It is easier to address these early than to discover missing evidence close to exchange or completion.

If the donor is still arranging the funds, be clear about that. Money already available and a gift that has only been promised may be treated differently.

Does a bigger deposit guarantee a mortgage?

No. A gifted contribution may help the buyer with the funds available for a purchase, but the application still depends on affordability, credit assessment, the property and the lender’s other requirements.

The source of the deposit is one part of the assessment, not a substitute for the rest.

What if the family member wants the money back later?

That should be explained openly. A repayable advance is not automatically a gifted deposit, even if repayments would not start immediately. There may also be legal questions about interests in the home.

The buyer and donor should understand the arrangement and seek appropriate independent legal or tax advice when needed. Mortgage guidance does not replace the conveyancer’s or tax adviser’s role.

A useful starting point

Before planning around a family contribution, establish the amount, who is giving it, whether it is genuinely non-repayable, where the money came from and when it will be available. Then check the documentary requirements with the lender and conveyancer.

The point is to make sure everyone is working from the same information.

This article is general information, not individual mortgage, legal or tax advice.

Mortgage options depend on affordability and lender criteria. A broker fee may apply and will be explained before you proceed.

Mortgages are secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Matt Sidnell, Mortgage & Protection Adviser, working with My Simple Mortgage.

My Simple Mortgage / Manor Financial Mortgage Services is a trading style of My Simple Mortgage Ltd, which is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority.