Gifted deposits: What are they and what do I need to know?

Gifted deposits: what you need to know

Automatically search over 1,800 mortgages.

A gifted deposit is an amount of money that is typically given by one member of family to another (but can be from anyone from a friend to an employer) with the aim of forming all or at least part of the money needed for a deposit on a home.

This sounds like a straightforward process, but due to anti-money laundering laws, things can get quite complicated, especially if the money is coming from outside of the UK. There are three main steps you need to know about and follow to receive a gifted deposit:

1. You need to formally confirm that the deposit is a gift

The person making the gift needs to send the recipient a letter that confirms that the money you have provided is a gifted deposit. You also need to state in the letter that you have no rights over the property and remember to sign it along with your name spelled out underneath your signature.

The person you are making the gifted deposit to then needs to pass a copy of the letter to their conveyancing solicitor. This is a crucial step (even more so if the recipient needs to take out a mortgage) because the solicitor needs to be able to prove that the person making the gift has no legal claim to the property and that you are indeed giving the money as a gift and never expect to have it back at a later date. This is so important because mortgage lenders can be concerned that a parent/grandparent may at a later date claim that the money was in fact just a loan and was never intended as a gift.

In fact, when the person that’s applying for a mortgage makes their application, they must let the lender know about the gifted deposit. If they fail to do this then the mortgage offer will need to be revised, which may delay things. Some lenders may even decide to decline the application if they are concerned about gifted deposits in general, so it is essential that you tell any potential lender upfront about the gifted deposit in case there are any objections.

2. Those making the gifted deposit need to provide ID and proof of address

Due to anti-money laundering procedures, the solicitor will need to prove the identity of the person gifting the deposit. Although what is acceptable ID varies depending on the solicitor, most will accept any of the following:

Photo ID

Provide either:

  • Passport (preferred)
  • Driving licence

Proof of address

Provide at least two of the following:

  • Bank statement (preferred)
  • Gas, electricity or water bill, or council tax statement
  • Driving licence
  • Letter from HMRC

3. Confirming where the gifted deposit came from

As part of anti-money laundering procedures, the solicitors have to prove that they know where the gifted deposit has come from. Often, the money will be from the sale of a home, pension drawdown or the sale of shares. In all of these cases, it will be simple to prove where the money has come from, as they will all these sources of capital will have been accompanied by documents that confirm all the details.

For money that has just been saved over time, rather than from the sale of an asset, bank statements could be produced from a year or more to illustrate how the savings have accumulated.

Two sad but important final points to note

Firstly, if the person making the gift dies within a certain time period, if the estate is over £325,000, the recipient of the gifted deposit may have to repay a  percentage back. Known as a tapering relief on gifts, 40% of the amount given would have to be repaid if the person who made the gift dies within one to three years. The amount that would be required to be paid back is tapered (gradually reduced) from three to seven years after the death.

Secondly, the recipient will probably have to repay the money if the person making the gift becomes bankrupt.

Although gifted deposits may seem to involve a lot of work, they can make it possible for a family member to get onto the property ladder or help them to move up it. With properties being so expensive these days, a gifted deposit could make all the difference, so it can very worthwhile making the effort.

Related articles


Credit reference company helps renters become first time buyers

Rental payments recognised in credit reports for the first time. For the first time ever, tenants will be able to use the fact they pay their rent in full and on time to help build up a better credit score and credit history. That’s because..

What options should I consider if I want to raise £20,000?

What options should I consider if I want to raise £20,000?

If you need to raise money for projects such as home improvements, a new car, a deposit for a house or a wedding, there are many ways you can go about it. Let’s look at a few options.

which credit option is best

Which credit option is best for you?

With the large amount of credit options that are now available such as credit cards, payday loans and mortgages, it can be confusing…

should remortgage_shouldn't remortage_release equity

Why should I and shouldn’t I remortgage?

Remortgaging is the process of switching your existing mortgage to a new deal. This article will help you decide if remortgaging is the best option for you.

What is credit score?

What is a credit score?

The terms credit score and credit rating often appear when it comes to your finances. Find out exactly they are and how they affect you.

Understanding debt consolidation loans

Understanding debt consolidation loans

Understand exactly what debt consolidation loans are and how they can help you if you’re struggling with debt.

bridging loans

Seven unexpected benefits of taking out bridging loans for purchasing a home

Everything you need to know about securing that dream home without having to wait to sell your existing home, along with seven other valuable benefits on top.

a father doing paperwork and talking to his child

Should I remortgage with the same lender or switch?

You do not have to move home to take advantage of a more competitive mortgage. But why it might be a good idea to move your mortgage to another lender, and when it may be better to stick with your current lender?

mortgaging a property, financial circumstances

What are my mortgage options if my circumstances change?

No-one can foresee what will happen in the future, but you do not need a crystal ball to see that a change in your financial circumstances may affect your ability to make repayments on your mortgage.

Gifted deposits

Gifted deposits: What are they and what do I need to know?

Whilst gifted deposit mortgages might appear straight forward, you need to formally confirm that the deposit is a gift and where it came from.






In the

Automatically search over 1,800 mortgages.

Share This