For many first-time buyers in Purley, Croydon & Greater London, saving for a deposit is one of the biggest hurdles to getting on the property ladder.
Between rising living costs, rent, bills and everyday expenses, putting aside enough money for a deposit can feel like a long slog. This is where a gifted deposit can make a real difference.
A gifted deposit is when someone, usually a parent, grandparent or close family member, gives you money to help with the deposit for your first home. It can reduce the amount you need to save yourself, may help you buy sooner, and could even give you access to a wider choice of mortgage options.
However, gifted deposits need to be handled properly. Mortgage lenders, solicitors and conveyancers will all want to know where the money has come from, whether it is genuinely a gift, and whether the person giving the money expects anything in return.
To help you understand how it works, the team at Shinerocks has put together this first-time buyer’s guide to gifted deposits.
A gifted deposit is money given to a homebuyer to help them buy a property. It is usually used to cover part, or sometimes all, of the buyer’s mortgage deposit.
The most important point is that the money must be a true gift.
That means:
It does not need to be repaid.
It is not a loan.
The person giving the money will not own any part of the property.
The person giving the money will not be named on the mortgage.
The person giving the money will not be named on the title deeds.
There must be no expectation of interest, rent, profit or future repayment.
This is important because lenders assess your mortgage affordability based on your income, spending, debts and financial commitments. If the money is actually a loan, it could affect what you can borrow.
A genuine gifted deposit gives the lender confidence that the money is helping you buy the property without creating another financial commitment in the background.
In many cases, gifted deposits come from parents or grandparents. Some lenders are most comfortable with gifts from close family members because the relationship is easier to understand and verify.
Common gifted deposit sources include:
Parents
Grandparents
Siblings
Step-parents
Other close relatives
Some lenders may also accept a gifted deposit from a friend, partner or more distant relative, but this can involve extra checks. The lender may ask more questions about the relationship, the reason for the gift, and whether the person gifting the money expects anything in return.
Different lenders have different rules, so it is worth getting advice before applying for a mortgage. This can help you avoid delays, especially if your gifted deposit is coming from someone other than a close family member. That’s why we recommend CBM Financial an independent mortgage broker, who is well respected by mainstream institutions, private banks and other specialist providers.
Sometimes, yes, but it can be more complicated.
If the person gifting the deposit lives overseas, or the funds are coming from an overseas bank account, your lender and conveyancer may need extra evidence. This is because they must comply with anti-money laundering rules and check the source of the funds.
They may ask for:
Bank statements
Proof of identity
Proof of address
Evidence showing how the money was built up
Translated documents, where needed
Confirmation that the gift is not a loan
Overseas gifted deposits can still be accepted by some lenders, but the process may take longer. If this applies to you, it is best to mention it as early as possible.
There is no single rule that applies to every lender. Some lenders may accept the whole deposit as a gift, while others may prefer you to contribute some of your own savings as well.
In practical terms, the larger the gifted deposit, the more questions may be asked about where the money came from and whether the gift could have inheritance tax implications.
A bigger deposit can be helpful because it may:
Reduce the amount you need to borrow
Improve your loan-to-value position
Give you access to more mortgage products
Potentially help you secure a better mortgage rate
Make your offer more attractive to a seller
However, the deposit must be properly documented. A large sum arriving in your bank account without a clear paper trail can cause delays.
They can do, depending on the amount gifted, the person’s estate, and how long the person gifting the money lives after making the gift.
Under current inheritance tax rules, individuals can usually give away up to £3,000 each tax year using their annual exemption. If they did not use the previous year’s exemption, they may be able to carry it forward for one tax year.
This means a parent could potentially gift £6,000 if they have not used last year’s allowance. If two parents are gifting money and both have unused allowances, this could increase the amount that falls within the annual exemption.
However, many gifted deposits are larger than this.
If the gift is above the available annual exemption, it may be treated as a potentially exempt transfer. In simple terms, if the person gifting the money lives for seven years after making the gift, it will usually fall outside their estate for inheritance tax purposes.
If they die within seven years, the gift may still be considered when inheritance tax is calculated. This does not automatically mean tax will be payable, but it is something families should be aware of, especially where larger gifts are involved.
If the person gifting the money is unsure, they should consider speaking to a tax adviser or solicitor before making the gift.
Your lender and conveyancer will usually ask for evidence to confirm that the money is legitimate and that it is truly a gift.
The person giving the money may be asked to provide:
A gifted deposit letter or declaration
Photo ID, such as a passport or driving licence
Proof of address
Bank statements
Evidence showing where the money came from
Confirmation that the money does not need to be repaid
Confirmation that they will have no legal interest in the property
The exact requirements can vary depending on the lender, conveyancer and the source of funds.
A gifted deposit letter is a written statement from the person giving the money. It confirms that the deposit is a gift, not a loan.
The letter will usually include:
The name of the person gifting the money
Their relationship to the buyer
The amount being gifted
The address of the property being purchased
Confirmation that the money is not repayable
Confirmation that the gifter will not own any part of the property
Confirmation that the gifter will not live in the property, unless agreed and disclosed
The gifter’s signature and date
Some lenders have their own gifted deposit form, so it is worth checking before writing your own letter. Your mortgage broker, lender or conveyancer can tell you what is required.
Lenders need to know that your deposit is legitimate, affordable and not hiding another financial commitment.
They will want to confirm:
The money is not a loan.
The person gifting the money has no ownership claim.
The funds have come from a legitimate source.
The gift does not create pressure on your finances.
The person gifting the money understands what they are agreeing to.
These checks protect the buyer, lender and solicitor. They are also part of anti-money laundering requirements.
Although the process can feel a bit paperwork-heavy, it is completely normal.
No, not if it has been declared as a gifted deposit.
If you are expected to repay the money, it is not a gift. It is a loan.
That matters because a loan may affect your mortgage application. The lender may treat it as a debt, which could reduce the amount you are able to borrow.
There is also a legal issue. If a family member gives you money but privately expects to be repaid, this can cause problems later, especially if there is a disagreement, a relationship breakdown, or the property is sold.
Be honest from the start. If the money is a loan, tell your lender and conveyancer. If it is a gift, make sure everyone understands that it is not repayable.
Yes. Many first-time buyers use a mixture of their own savings and a gifted deposit.
For example, you may have saved £10,000 and receive £15,000 from your parents, giving you a total deposit of £25,000.
Your lender will want to see evidence for both parts. This may include your own bank statements showing your savings history, as well as documents from the person gifting the money.
This is common.
Some parents want to help their child buy a home but worry about what happens if the buyer later separates from a partner, sells the property, or experiences financial difficulty.
If the money is genuinely gifted, the parent cannot usually ask for it back later. If they want legal protection, the arrangement may need to be structured differently, perhaps as a loan or with legal advice around ownership and declarations of trust.
This is an area where proper advice matters. Trying to keep things informal can lead to disputes later.
If you are planning to use a gifted deposit, a little preparation can save a lot of stress.
Here are some useful steps:
Speak to a mortgage adviser before applying.
Tell your lender and conveyancer about the gifted deposit early.
Ask the person gifting the money to keep clear records.
Avoid moving money between several accounts if possible.
Make sure the gift comes from the gifter’s own bank account.
Check whether your lender has its own gifted deposit form.
Be clear whether the money is a gift or a loan.
Keep copies of all letters, ID checks and bank statements.
Ask about inheritance tax if the gift is large.
The earlier you deal with the paperwork, the smoother your purchase is likely to be.
A gifted deposit can be a fantastic way to get onto the property ladder sooner, but it needs to be handled properly from the start.
Whether you are just starting your property search or you have already found a home you love, the team at Shinerocks can help you understand the buying process, prepare for the next steps, and move forward with confidence.
For friendly advice about buying your first home in Purley, Croydon & Greater London, call Shinerocks on 020 8660 2010 or email enquiries@shinerocks.co.uk .
We’ll help you understand what to do next, what questions to ask, and how to make your first move feel a lot less daunting.
In the meantime we've answered some of your common questions about gifted deposits.
No. A gifted deposit can sometimes come from another family member, such as a grandparent or sibling. Some lenders may accept gifts from friends or more distant relatives, but they may ask for extra checks.
Yes. You must tell your lender if some or all of your deposit has been gifted. They will usually ask for a gifted deposit letter and proof of where the funds came from.
Often, yes, but your conveyancer may advise on the best way to transfer the money. Whatever route is used, there must be a clear paper trail showing where the money came from.
No. With a true gifted deposit, the person giving the money does not own any share of the property and will not be named on the mortgage or title deeds.
Possibly, yes. Some lenders may accept a gifted deposit with a 5% deposit mortgage, but criteria vary. It is worth checking before making an offer on a property.
Use the form to send us your questions and we'll respond as quickly as possible.
You can also call us on 020 8660 2010, or email enquiries@shinerocks.co.uk.
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