A Complete Guide to Gifted Deposits for First Time Home Buyers

Saving for a deposit is one of the biggest hurdles for first-time home buyers, so it’s no surprise that many turn to family for financial help. A gifted deposit can boost your chances of getting on the property ladder, but there are important rules and requirements to understand before accepting one.

Here’s everything you need to know about gifted deposits, how they work, and what lenders will expect from first-time home buyers.

 

What is a Gifted Deposit?

A gifted deposit is money given to a homebuyer to put towards their property deposit, with no expectation of repayment. Unlike a loan, a gifted deposit must be an outright gift, meaning the person giving the money (the “gifter”) cannot ask for it back or hold any claim to the property.

Gifted deposits are especially common among first-time home buyers, particularly those receiving financial help from parents or close relatives.

 

Who Can Gift a Deposit?

Lenders prefer deposits to come from close family members, typically:

• Parents (including step-parents)

• Grandparents

• Siblings

• Other close relatives (aunts, uncles, etc.)

Some lenders may accept deposits from friends or non-relatives, but this is less common and could be subject to stricter checks.

 

What Do Mortgage Lenders Require?

When accepting a gifted deposit, some lenders may require a specific gifted deposit letter. Always check with your broker or lender before getting a signed letter from the gifter to avoid unnecessary paperwork.

If part of your deposit is gifted, lenders will need proof that the money is a gift and not a loan. This typically includes:

• A Gifted Deposit Letter - A signed declaration from the gifter confirming:

  • The amount being gifted

  • Their relationship to you

  • That they expect no repayment and have no interest in the property

• Proof of Funds - The gifter may need to provide bank statements showing where the money came from.

• Anti-Money Laundering Checks - Some lenders will check the source of funds to ensure the money is legitimate and not from an undisclosed loan.

 

Do Gifted Deposits Have Tax or Legal Implications?

Gifted deposits are not subject to tax at the time of gifting, but they could have inheritance tax (IHT) implications if the gifter passes away within seven years of giving the money. If the gift exceeds the IHT threshold, some tax may be payable by the estate.

To avoid surprises, it’s always worth seeking legal or financial advice when accepting a large gift.

 

How a Gifted Deposit Affects Your Mortgage Application

Most lenders will treat a gifted deposit the same as a personal savings deposit, but there are a few things to keep in mind:

1. The Bigger the Deposit, the Better - A larger deposit means access to better mortgage rates and lower monthly repayments.
2. The Gifter Must Not Have a Claim on the Property - If they want to retain any ownership rights, the lender may reject the application or require a different legal arrangement.
3. Some Lenders Have Restrictions - A few mortgage providers may limit the amount of a deposit that can be gifted, particularly for high-percentage mortgages (e.g. 95% LTV deals).

 

Adding a Gifted Deposit to Your Home Goal in Klink

If you receive a gifted deposit, it should be added to your savings total to help you track your progress towards buying a home. Klink’s Home Goal feature allows you to input all sources of your deposit - including gifted amounts - so you can get a clear picture of how close you are to reaching your target.

Klink also helps with:

• Mortgage Readiness - Lenders will still check your spending habits and financial conduct, so Klink’s Mortgage Readiness feature can highlight any red flags before applying.

• Spending Insights - If a gifted deposit means you can buy sooner, Klink helps track affordability and ensure your finances are stable for homeownership.

 

Final Thoughts for First-Time Home Buyers

Gifted deposits can make homeownership more accessible for first-time home buyers, but they come with conditions. Lenders will want to see proof of the gift, and tax implications should be considered.

If you’ve been given financial help towards your deposit, make sure you track it properly, ensure you meet lender requirements, and keep your financial profile in good shape.

Download Klink today to manage your savings, track your home goal, and get mortgage-ready.