Mortgages with a Gifted Deposit: Your Essential Guide 2025

For many first-time buyers in the UK, saving enough for a mortgage deposit without any outside help is extremely difficult. Rising property prices and the cost of living mean that it can take years — sometimes decades — to save the tens of thousands of pounds needed to get on the property ladder. This is where gifted deposits come in.

A gifted deposit is money given to you by someone else, usually a family member, to use as part or all of your mortgage deposit. It is one of the most common ways first-time buyers fund their purchase, and most mainstream mortgage lenders accept them. In this guide, we explain exactly how gifted deposits work, the rules lenders apply, the documentation you will need, and the potential pitfalls to watch out for.

What is a gifted deposit?

A gifted deposit is a sum of money given to a homebuyer to use towards their property purchase deposit. The crucial word is gift — the money must be given freely, with no expectation of repayment and no strings attached. It is not a loan, and the person giving the money must not expect any financial interest in the property or any repayment at any point in the future.

Lenders are very clear on this distinction. If the money is a loan — even an informal one from a family member — it must be disclosed as a debt. This changes the affordability calculation and could affect whether your mortgage is approved. If a lender discovers that money declared as a gift is actually a loan, it can lead to the application being declined or, in the worst case, the mortgage offer being withdrawn.

How gifted deposits are typically used:

• To provide the entire deposit — for example, a parent gifts £25,000 for a 10% deposit on a £250,000 property
• To top up the buyer’s own savings — for example, you have saved £10,000 and a family member gifts an additional £15,000 to bring your total deposit to £25,000
• To help the buyer reach a lower LTV band — for example, moving from a 95% LTV to a 90% LTV product, which comes with better interest rates

Regardless of how it is used, the gifted deposit must be fully documented and declared to the lender and your solicitor.

Who can gift a deposit?

The rules about who can provide a gifted deposit vary between lenders, but there are common patterns across the market.

Almost always accepted:

• Parents
• Grandparents
• Siblings

Usually accepted by most lenders:

• Aunts and uncles
• Step-parents
• Legal guardians

Accepted by some lenders:

• Other family members (cousins, in-laws)
• Partners (who are not going on the mortgage)
• Close friends

Rarely accepted:

• Employers
• Business associates
• Unknown third parties

If your gifted deposit is coming from someone other than a parent or grandparent, it is important to check with your broker which lenders will accept it. At Option Finance, we have detailed knowledge of lender policies and can match you with a lender that accepts your particular situation.

Some lenders also require that the buyer contributes at least a minimum amount from their own funds — even if the rest is gifted. For example, a lender might require you to provide at least 5% of the deposit yourself, with the gifted amount making up the balance. However, many lenders will accept a 100% gifted deposit, meaning the buyer does not need to contribute any of their own savings.

What documentation is needed?

Lenders require specific documentation to verify a gifted deposit. This is driven by anti-money laundering regulations and the lender’s own risk management policies. Here is what you will typically need to provide:

A gifted deposit letter:

This is a written declaration from the person giving the gift, confirming:

• Their full name, address, and relationship to the buyer
• The amount being gifted
• That the money is a gift and not a loan
• That they have no expectation of repayment
• That they will have no financial interest in the property
• Their signature and the date

Your solicitor or broker can usually provide a template for this letter.

Proof of the source of funds:

The lender and your solicitor will need to see evidence of where the gifted money has come from. This typically includes:

• Bank statements from the person giving the gift — usually three to six months’ worth, showing the funds are available and how they accumulated
• If the money comes from savings, the statements should show the balance building over time
• If the money comes from a property sale, a completion statement or similar evidence may be required
• If the money comes from an inheritance, a grant of probate or letter from the estate solicitor may be needed
• If the money comes from investments, platform statements showing the withdrawal or sale

Proof of identity:

The person giving the gift may also need to provide proof of identity (passport or driving licence) and proof of address, particularly if the gift is substantial.

This documentation is not optional — it is a legal requirement. If you cannot provide adequate proof of the source of funds, the lender may decline the application or your solicitor may be unable to proceed.

How a gifted deposit affects your mortgage application

Having a gifted deposit does not negatively affect your mortgage application in most cases. In fact, it can be very positive, because it allows you to put down a larger deposit than you could otherwise afford, which means:

• Lower LTV ratio — accessing better interest rates and more product options
• Improved affordability — borrowing less means lower monthly payments
• Stronger application — a larger deposit reduces the lender’s risk

However, there are some considerations:

Affordability is still assessed on your income — the gifted deposit helps with the upfront cost, but the lender will still assess whether you can afford the monthly mortgage payments based on your own income and financial commitments. Use our affordability calculator to check what you might be able to borrow.

Some lenders want the buyer to have some personal savings — as noted above, not all lenders accept a 100% gifted deposit. Some want to see that the buyer has the financial discipline to have saved at least a small amount themselves.

The gift must be received before completion — the funds need to be in the buyer’s account (or their solicitor’s account) before the purchase can complete. Plan the timing of the transfer carefully, allowing for bank processing times and any anti-fraud checks your bank may apply to large incoming transfers.

Tax implications of gifted deposits

One area that causes confusion is the tax treatment of gifted deposits. Here is what you need to know:

For the buyer:

• Receiving a gifted deposit is not taxable income. You do not need to declare it on your tax return, and you will not pay income tax or capital gains tax on the gift

For the person giving the gift:

• There is no immediate tax charge when giving a cash gift in the UK
• However, the gift may be subject to inheritance tax (IHT) if the person giving the gift passes away within seven years of making the gift
• Each person has an annual IHT exemption of £3,000 (the annual gift allowance), plus a £250 small gifts exemption per recipient
• Gifts above the annual exemption fall within the seven-year rule — if the giver survives seven years, the gift is completely exempt from IHT. If they die within seven years, the gift may be subject to taper relief, with the IHT rate reducing the longer the giver survives
• For large gifts, the person giving the money may wish to take independent financial advice to understand the IHT implications

It is also worth noting that if the gifted deposit is being funded from the sale of a property or disposal of investments by the giver, they may have their own capital gains tax considerations. This is separate from the mortgage process but worth being aware of.

Common questions about gifted deposits

Can I get a mortgage with a 100% gifted deposit?

Yes, many lenders accept a fully gifted deposit. Your broker can identify which lenders allow this. At Option Finance, we regularly arrange mortgages with 100% gifted deposits.

Can a friend gift me a deposit?

Some lenders accept gifts from close friends, but this is less common than family gifts. You will need to check with your broker which lenders have more flexible policies.

Can the gifted deposit be used for anything other than the deposit?

The gifted deposit letter and lender documentation typically specify that the money is for the property purchase deposit. It should not be used for other purchase costs (such as solicitor fees or stamp duty) unless the gift letter specifically covers this. Some families choose to gift a larger amount to cover additional costs, which should be reflected in the documentation.

Does a gifted deposit affect stamp duty?

No. Your stamp duty liability is based on the property price, not how you fund the deposit. As a first-time buyer, you benefit from stamp duty relief — 0% on the first £300,000 and 5% on the portion between £300,000 and £500,000. Use our stamp duty calculator to check your liability.

What if the gift comes from overseas?

Gifted deposits from overseas family members are accepted by some lenders, but additional documentation is usually required, including proof of identity, source of funds, and compliance with anti-money laundering regulations. The funds may also need to be held in a UK bank account for a period before completion. This is a more complex situation, and professional advice is strongly recommended.

Gifted deposits versus other family support options

A gifted deposit is one of several ways family members can help you buy a home. Here is how it compares to the alternatives:

Gifted deposit vs guarantor mortgage — with a gifted deposit, the money is given permanently and the family member has no ongoing obligations. With a guarantor mortgage, the family member retains their money but takes on liability if you default. A guarantor mortgage is better for families who cannot afford to give money away but are willing to take on risk.

Gifted deposit vs family springboard mortgage — a family springboard mortgage allows the family member’s savings to be returned after a set period. It is a middle ground — less permanent than a gift, less risky than a guarantee.

Gifted deposit vs joint mortgage — buying together as a joint mortgage means the family member is jointly responsible for the debt and may have an ownership share. This has implications for stamp duty (the 5% additional property surcharge may apply if the family member already owns a property) and the family member’s future borrowing capacity.

Gifted deposit vs shared ownership — if family help is not available or not sufficient, shared ownership reduces the amount of deposit needed by allowing you to buy a share of the property.

Tips for a smooth gifted deposit process

Based on our experience at Option Finance, here are some practical tips to ensure your gifted deposit does not cause delays or problems:

1. Start the documentation early — gather the gifted deposit letter, bank statements, and identity documents well before you submit your mortgage application
2. Transfer the funds in good time — allow at least two weeks for the money to arrive in your account and for any bank checks to clear
3. Avoid last-minute gifts — lenders scrutinise unexplained large deposits in your bank statements. If the gift arrives just before you apply, it can raise questions. Ideally, have the funds in your account for at least one full bank statement period before applying
4. Be completely transparent — declare all gifted funds to your lender and solicitor. Failing to disclose a gift can be treated as mortgage fraud
5. Use a mortgage broker — a broker can identify the most suitable lenders for your situation and ensure all the documentation is correct before submission. This avoids delays and reduces the risk of your application being queried

Use our mortgage calculator and repayment calculator to model different scenarios, comparing how a larger gifted deposit could reduce your monthly payments and total interest costs.

Get expert advice on gifted deposit mortgages

Gifted deposits are a straightforward and effective way to help first-time buyers get onto the property ladder, but getting the documentation and lender selection right is important. At Option Finance, we help buyers with gifted deposits every day and know exactly which lenders offer the best terms for your situation.

Whether you are a first-time buyer with a gifted deposit, remortgaging with additional family support, or dealing with more complex circumstances including adverse credit, our team is here to help.

Apply now to speak with one of our mortgage advisers and take the next step towards your new home.