Bank of Mum and Dad – Gifted Deposits Explained

For many first-time buyers and home movers, saving a deposit can be one of the biggest challenges in getting onto or moving up the property ladder. 

Even where income and affordability checks are met, the rising cost of living and higher property values can make it difficult to save enough to qualify for the mortgage needed.

One of the most common solutions is a gifted deposit from parents or family members — often referred to as help from the “Bank of Mum and Dad.”

So how do gifted deposits work, and what do you need to know before using one?

What Is a Gifted Deposit?

A gifted deposit is when a parent (or another family member) gives money to help buy a property, typically to be used towards the deposit. 

The key word is “gifted.” This means the funds are given outright and do not need to be repaid.

Lenders usually require a signed gifted deposit letter confirming that:

• The money is a genuine gift, not a loan
  
• The person gifting the money has no legal interest in the property
  
• The funds are from a legitimate, traceable source
  

This helps protect both the lender and the borrower, ensuring there are no future disputes about ownership or repayment.

Who Can Gift a Deposit?

Most lenders accept gifted deposits from immediate family members, such as:

• Parents or step-parents
  
• Grandparents
  
• Siblings
  

Some lenders may also consider gifts from extended relatives, partners, or close friends, but their criteria can vary. 

The further removed the relationship, the more likely additional checks or evidence will be required.

How Much Can Be Gifted?

There’s no set limit on how much can be gifted. However, the source of funds must be fully evidenced — usually through bank statements — and in some cases, the lender may ask for confirmation of how the funds were built up (for example, from savings or investment withdrawals).

Depending on the lender, there may also be a ‘sense check.’ For example, is it realistic that a close friend or sibling will gift hundreds of thousands of pounds?

Gifts can be partial or full deposits. In some instances, parents may even provide additional funds to cover fees or moving costs, although these are not always included in the deposit calculation.

What Are the Tax Implications?

A gifted deposit is not subject to immediate tax, but inheritance tax (IHT) rules could apply if the person gifting the money passes away within seven years of the gift.This is often known as the “seven-year rule,” and it’s important for families to understand how this might affect the wider estate and future tax planning. Seeking tax advice from an accountant or qualified adviser is always recommended.

Can Parents Protect the Gift?

Yes — there are ways for parents to gift money while still safeguarding their intentions.

For example, if the buyer is purchasing with a partner, a declaration of trust or can record how much each party contributed. This can help protect the parent’s gift if the relationship ends and the property is sold.

In cases where the funds are intended as a loan rather than a gift, lenders will require this to be disclosed and it may affect affordability assessments.

What Are the Downsides for the Recipient?

While a gifted deposit can make buying a home achievable sooner, there are some considerations for the recipient too:

• Future inheritance may be affected. A gift given now could reduce the amount available from a parent’s estate later.
  
• Expectations or misunderstandings may arise — particularly if there are siblings or other family members involved. It’s wise to discuss intentions openly before money changes hands.
  
• Mortgage delays can occur if the lender requires additional documentation or proof of source of funds, especially if multiple gifts are involved.
  
• Emotional pressure may follow — some buyers feel obliged to involve parents in financial decisions about the property because of the gift.

Being clear from the outset about the nature of the gift and ensuring all parties understand the implications can help avoid issues later.

What Are the Downsides for the Giver?

Although helping a child or family member buy a home can be rewarding, there are potential downsides for the person gifting the funds:

• Reduced personal savings or retirement capital. Releasing a large sum could impact future plans, especially if those funds were intended for long-term income or care needs.
  
• Loss of control. Once the money is gifted, it legally belongs to the recipient — even if circumstances change or relationships break down.
  
• Inheritance tax exposure. If the gift exceeds the annual allowance and the giver passes away within seven years, part of the gift may count towards their estate for IHT purposes.
  
• Future financial pressure. Parents who later need to borrow, remortgage, or release equity may find their own affordability affected by having gifted large sums.

Before making a gift, it’s important to review your own financial position carefully and seek advice to understand the long-term implications.

Do All Lenders Accept Gifted Deposits?

Most mainstream lenders accept gifted deposits, provided they meet documentation and relationship criteria. 

However, each lender has their own rules, so professional advice is essential to ensure the gift is treated correctly and the mortgage proceeds without delay.

If the deposit comes from multiple family members, this can add complexity, as each donor must complete their own declaration and provide evidence of the source of funds.

Alternatives to Gifted Deposits

If parents wish to help but prefer not to give money outright, there are other options such as:

• Family deposit mortgages – where savings are held in a linked account as security
  
• Joint Borrower Sole Proprietor (JBSP) mortgages – allowing parents to support affordability without going on the deeds
  
• Equity release or retirement interest-only mortgages – allowing older parents to release funds from their own property
  

Each route carries different risks and tax considerations, so it’s vital that everyone involved receives independent advice.

Final Thoughts

Gifted deposits remain one of the most common ways families help younger generations buy their first home. With the right structure and documentation, they can make homeownership possible without unnecessary complications or tax surprises.

The key is to plan ahead, take advice early, and ensure all parties understand both the financial and emotional implications.

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The precise amount will depend upon your circumstances.

Symmonds de Lacey is a trading style of Easy Street Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Company number 6430453. Registered address: Basepoint, 377-399 London Road, Camberley, Surrey, GU15 3HL.

Please note, we are not tax advisers. For tax advice, please speak to a qualified tax professional.

Information correct at time of writing – November 2025.