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How Do Gifted Deposits Work – Helping Your Child Buy a Property

How Do Gifted Deposits Work - Helping Your Child Buy a Property

gifted deposit

The UK Office for National Statistics has reported that house prices have increased by an average of 5-6% annually, while wage growth has been significantly slower. As a consequence, the average deposit necessary to acquire a property has increased, which has made it difficult for first-time buyers to enter the property market. The rising costs of living, rent, student loans and general everyday expenses make it challenging for prospective buyers to save enough for a deposit on a house purchase. As a result, many turn to their families for assistance in obtaining their first home. 

A gifted deposit is a common method for parents or other family members to provide assistance. However, what precisely is a gifted deposit, how do lenders perceive it and what are the advantages and disadvantages of employing one?

What is a gifted deposit?

A gifted deposit is a sum of money that a family member or friend provides to a homebuyer in order to assist them in meeting the deposit requirements for a mortgage. This money is a gift, not a loan. A declaration must be signed by the individual who is providing the gift, indicating that there is no expectation of property ownership or repayment. This mitigates the buyer’s financial burden and prevents potential complications or misunderstandings in the future.

How are gifted deposits perceived by mortgage lenders?

The criteria for approving gifted deposits vary among lenders. Some may impose limitations on the provider of the gift (e.g. restricting it to immediate family members) or the quantity that can be given. Therefore it is important to meet and discuss with a mortgage adviser or lender prior to using a gifted deposit.

The lender’s primary objective is to verify the money being gifted doesn’t impose any extra financial or legal obligations on the borrower, including the expectation of repayment.


In order to adhere to anti-money laundering regulations, lenders will typically request documentation in regards to the origin of the funds. This will likely be in the form of bank statements or other financial documents.

Advantages and Disadvantages of Using a Gifted Deposit to Get on the Property Ladder

The main advantage of using a gifted deposit is that it can aid you in securing a property sooner than you would be able to if you were relying solely on your own savings. This is particularly crucial in a property market that is on the rise, as postponing a purchase could result in a higher price for the property in the future. Furthermore, a gifted deposit can increase the percentage of the purchase price that you are able to cover, thereby enabling you to access more favourable mortgage rates. Additionally, lenders often provide more favourable terms to purchasers who have larger deposits, as it mitigates their risk.

Although a gifted deposit is a generous act, it may occasionally result in tensions within families. It is vital to have transparent conversations about the gift to guarantee that all parties are in agreement. It is important to look at the factors that affect the inheritance planning of parents or relatives who give a gifted deposit. Giving away a large sum of money could affect their financial security in the future or leave less money for other people who are entitled to receive it. To protect everyone, it’s best to get legal advice and make sure that all transactions are properly recorded.

Conclusion

A gifted deposit can be a valuable resource for numerous first-time purchasers who are experiencing difficulty in saving enough money for a mortgage deposit. It can facilitate the acquisition of a residence more promptly, enhance mortgage terms and alleviate financial strain. Nevertheless, it is imperative to exercise caution during the process, taking into account the potential effects on legal obligations, inheritance planning and family relationships.


Before accepting or providing a gifted deposit, it is crucial to ensure that all parties are aware of the potential consequences. Consult with a solicitor and financial advisers to ensure that you receive the most appropriate advice and guidance throughout the process. 

If you require any guidance on purchasing a property, get in touch with our experienced group of property law solicitors on 0141 433 2626.

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