Using a gifted deposit for your mortgage

It’s more difficult than ever to get a foot on the property ladder, with rising prices and more stringent affordability checks preventing many first time buyers taking the leap from tenant to homeowner. Team this with the fact that to get the best mortgage deal, you need a healthy house deposit and it’s been a recipe for disaster for many individuals looking to buy a home in the UK in recent years.

Here HomeOwners Alliance explains how much deposit you need to purchase a property in 2025 to put things into perspective:

“You’ll usually need at least a 5% deposit to buy a house. This means if you’re buying a house for £250,000 you’ll need at least a £12,500 mortgage deposit. However, the bigger your deposit, the bigger the choice of mortgages you’ll typically have. And you’ll usually get access to better mortgage rates too… Saving a bigger deposit to buy a house is easier said than done but there are ways you may be able to boost your deposit…”

With the same article revealing that the average first time buyer deposit for a house in the UK is even higher – it’s £56,526 in the East of England – those looking to purchase their very first home have an uphill battle. Thankfully, the bank of mum and dad is here to help!

According to Savills, 52% of first time buyers purchased their home with assistance from generous parents or other relatives. If you intend to do the same, you’ll want to read this advice for using a gifted deposit for your mortgage…

Understanding how gifted deposits work

A gifted deposit is just that, which means it is not a loan and the money isn’t expected to be repaid as such. With this in mind, the individual gifting the money for use as a mortgage deposit has no rights over the property being bought.

Considering the state of the housing market at present, the use of gifted deposits is becoming more and more widespread.

The rules on who can gift your deposit

Gifted deposits don’t have to come from the bank of mum and dad, but it helps! While most lenders prefer that their applicants receive gifted deposits from immediate family members, this is not always the case.

Parents, grandparents, siblings and partners are generally acceptable gifters. Some lenders have strict criteria about who can gift, and may not accept monetary gifts from distant relatives (including aunts and uncles) and friends as a result.

The declaration process for gifted deposits

You must inform your conveyancer or solicitor if you intend to use a monetary gift to either fully or partially cover your mortgage deposit. Working with a mortgage broker, like us, is another thing we’d recommend. A broker will be able to advise on which lenders find gifted deposits acceptable.

During the mortgage application, there are further declarations to be made. The lender will want to see that the money you are receiving is indeed a gift and not a loan. This will involve assessment of bank statements to prove the origins of the gift.

The person gifting the funds will need to complete a gifted deposit declaration or letter stating their name, the name of the giftee, the relationship they share, the amount of money being gifted, where the funds have come from, and confirmation that it is a gift and they have no rights over the property.

In the declaration, the person gifting the money will also need to provide evidence that they are financially solvent. Identification and proof of funds will be requested during the application process too.

Gifted deposit limits and tax implications

You are not limited on the amount of money you can receive as a gift to use as a mortgage deposit. You can also use your own savings to top up the fund and get an even better mortgage deal. Gifted deposits are generally tax-free too, providing the gift is no more than £3,000.

Please note, gifts of over £3,000 may be subject to inheritance tax if the gifter passes away within seven years of gifting.

For further advice about gifted deposits or to get started with your mortgage application, please contact us today.