Saving for a home deposit is hard. A gifted deposit can help make it a little easier. It’s money given, usually by a family member but could sometimes be from a friend, to help you get the deposit you need to buy your home.
What’s a gifted deposit?
When you take out a mortgage, you'll need a deposit. This is money you pay towards the cost of your home, usually a percentage of the price. So, if you’re buying a property for £200,000, a 10% mortgage deposit would be £20,000.
But here’s a shortcut. A gifted deposit just means that someone else, often a family member, gives you some or all of your mortgage deposit. It could mean getting your mortgage without spending years saving.
How does a gifted deposit work?
The deposit has to be a gift. This means the person giving the money doesn’t expect you to pay it back, and they won’t have any share or interest in the property.
When putting down your mortgage deposit, just follow these steps.
- Include the gifted money in your total deposit amount.
- Let your lender know how much of it was a gift.
Other lenders may need a gifted deposit letter confirming the money is a gift, not a loan.
For gifted deposits where the money comes from abroad, the lender might need to carry out some extra checks.
Who can gift a deposit?
Gifted mortgage deposits usually come from close family members, including parents, step-parents, grandparents, siblings, and in-laws. Some lenders prefer immediate family. Others, like us, accept gifts from friends, as long as the money isn’t a loan, you don’t need to pay it back and the person giving you the money isn’t going to live in or have any interest in the property.
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Applications are subject to status and lending criteria. Applicants must be UK residents aged 18 or over. The amount we will lend depends on your circumstances, the amount borrowed and the property. A higher deposit may be required for a flat or new build.
If you have a gift towards your home deposit, your solicitor will check to make sure everything stacks up. These checks are part of Anti-Money Laundering (AML) rules, helping to make sure all money used to buy your home is above board.
- Identification checks: Solicitors must check the identity of the person giving the money. This typically needs photographic ID and proof of address from the giver.
- Source of funds check: The solicitor might need documents to prove where the money came from. These may include bank statements covering the last 3 to 6 months, showing the money in the giver's account and where it came from. The money must be from a legitimate source, such as savings built up over time, the sale of an asset, or other means the solicitor can verify.
- Gifted deposit declaration: Your declaration must be signed by the giver, and confirm that the funds are a gift and not a loan. It needs to state that they don’t expect the money back and have no claim to the property.
- Paper trail: There must be a clear paper trail showing the money being transferred from the giver to you. This includes the transfer from their bank account to yours and then to the solicitor.
- Mortgage lender requirements: The solicitor will make sure the lender knows about the gifted deposit and that it meets their lending policy. They’ll tell the lender and get their approval before finalising the home purchase.
Useful information on gifted deposits
If part or all of your home deposit has been gifted, a mortgage lender might need proof it’s really a gift. A gifted deposit letter signed by the person or people giving you the money will show that you don’t need to pay it back.
This can also be called a 'gifted deposit declaration’.
It should include:
- Your name
- Their name and your relationship with them
- The value of the gifted deposit, and where it came from
- Confirmation that whoever is giving you the money doesn’t expect you to pay it back, won’t live in the property or have any claim to the property.
We won’t usually ask for a gifted deposit letter if you decide to take your mortgage with us.
At Santander we generally accept gifted deposits for residential mortgages from family and friends as long as the money is a non-repayable gift and the person giving you the money has no interest in the property and won’t live in it.
Gifted deposits are tax-free. However, a gift could potentially become subject to inheritance tax. For advice on inheritance tax, please contact an independent financial adviser.
When a gifted deposit is paid into your account, it becomes your money, but you still need to tell your lender where it came from.
Yes, it’s possible to use gifts from more than one person to make up your mortgage deposit. You’ll need to tell your lender where the money came from. They’ll also want to know you don’t need to pay it back and that the gifters won’t have any interest in your property or live in it.
You’ll need to let your mortgage lender know if money is being gifted to you to pay for Stamp Duty or buying costs.
If you’ve never owned a property, you won’t pay any stamp duty if you’re buying a home for £300,000 or less. You’ll also pay a lower Stamp Duty rate on properties worth up to £500,000, even if you’re using a gifted deposit.
A gifted deposit could help you afford a more expensive home or buy in a better location. By increasing your deposit, you can borrow less and reduce your loan to value (LTV) ratio. A lower LTV ratio means a lower interest rate and monthly payment.
Not declaring a gifted deposit could affect your mortgage application. To make sure things go smoothly, lenders need to know about any gifted money, where your deposit is coming from, and if you have to pay it back.
Giving money to a relative or friend to use as the deposit on their home should be simple.
Their solicitor may ask you to prove your identity and show where the money came from. You may also need to provide bank statements. If any of the deposit funds come from outside the UK, you may need to share extra supporting evidence.
The solicitor working for your loved one will let you know what documents they need.