What are the rules for gifted deposits?
Before you can use a gifted deposit for a mortgage, there are a few rules you should be aware of:
1. A gifted deposit must be a genuine gift, not a loan
This means the person gifting the money does not expect:
The receiver to pay back any of the gifted money
Any legal or financial stakes in the property being purchased
To live in the property being purchased
If the person helping you with a deposit expects any repayments or claims to the property, it’s highly unlikely a mortgage lender will accept the money as a gifted deposit. Instead, it will be considered a loan, which may affect your mortgage deal and how much you can potentially borrow.
2. The donor usually needs to be a relative
Many lenders have their own rules about who can gift a deposit. Generally speaking, most lenders only accept gifted deposits from direct family members. Some lenders may accept a gifted deposit from non-family members, but that’s not always the case, so it’s a good idea to check each lender’s policy in advance.
People who may gift a deposit | People who may not be able to gift a deposit |
|---|
Parents or step-parents Grandparents Siblings or step-siblings Partners In-laws Your children | Friends The vendor (the person selling the house) Cousins Your employer Landlords or property developers |
3. A gifted deposit needs to be declared to your lender, solicitor, and conveyancer
It’s crucial you let your mortgage lender, solicitor, and conveyancer know somebody is gifting you a house deposit, whether that’s a portion of it or the entire sum. They need to know this to confirm:
The person giving you the gift has no legal claim to the property
You won’t have a hidden debt that may affect your monthly mortgage payments
The source of the money
The identity of the donor
Not declaring a gifted deposit can have serious consequences, such as your application being rejected, changes to your mortgage repayments or, in serious cases, legal charges for mortgage fraud. That’s why it’s important to declare gifted deposits as soon as you can to avoid any potential issues.
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