A gifted deposit
A relative gives you money towards the deposit and expects nothing back. Lenders accept this from parents, grandparents, siblings and often others. They will want:
- A signed gift letter saying the money is a gift, not a loan, that the giver will have no interest in the property, and the amount.
- Proof the giver has the money: a bank statement, and sometimes where it came from (savings, house sale, inheritance).
- ID for the giver, for anti-money-laundering checks, via your solicitor.
Tax: there is no tax to pay when you receive a gift. If the giver dies within seven years, larger gifts can count towards inheritance tax on their estate; most family deposits are within the allowances, but it is worth them knowing.
A family loan (be careful)
If the money has to be repaid, it is a loan, and most lenders will either refuse it or count the repayments against your affordability. Do not call a loan a gift on the form; it is fraud, and solicitors ask directly.
Guarantor and joint borrower mortgages
Joint borrower, sole proprietor (JBSP): a parent's income is added to yours so you can borrow more, but only you own the home. Parents are liable for the mortgage if you do not pay. Popular because it avoids the extra stamp duty parents would owe if they co-owned.
Guarantor mortgages: a relative guarantees the loan, sometimes by putting savings in a locked account with the lender or a charge on their own home. Fewer lenders offer these now; a broker knows which.
Buying with a parent as co-owner
Possible, but if the parent already owns a home they pay the higher additional-property stamp duty on the whole purchase, and you may lose first-time buyer relief. Usually JBSP is better. Take advice.
Protecting everyone
If a parent is contributing a large sum and wants it back if you sell or split up with a partner, a solicitor can draw up a deed of trust. Lenders need to know about it. Better to sort it now than argue later.
A note on the numbers. Thresholds, schemes and typical costs are correct as far as we know at the time of writing and are for England and Northern Ireland unless we say otherwise. Rules change and lenders differ. Check the current position, and get advice from a qualified broker before you commit.
Quick answers
Can the gift come from someone who is not family?
Some lenders accept gifts from friends or employers, most prefer family. Tell your broker who is giving before you apply.
Do my parents need to be involved in the mortgage if they gift the deposit?
No. A gift is just money. They sign a letter and provide a statement, and that is the end of their involvement.
Can the gift be paid directly to the solicitor?
Yes, and it often is, but the solicitor still needs the gift letter and the giver's ID and source of funds first.
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