A gifted deposit is when money given to a buyer by a family member (or in some cases a friend) makes up part or all of their mortgage deposit. Many buyers rely on family gifts to reach the deposit threshold, particularly first-time buyers.
What lenders require
Lenders require a gifted deposit letter confirming: the amount of the gift, the relationship between donor and buyer, that the money is a non-repayable gift (not a loan), and that the donor claims no interest in the property.
Anti-money laundering checks
Your solicitor will require proof of the source of funds (bank statements showing where the money came from). Gifts of large amounts from overseas face additional scrutiny.
Inheritance Tax considerations
Gifts of money are potentially exempt from Inheritance Tax after 7 years (the Potentially Exempt Transfer rule). If the donor dies within 7 years, the gift may be included in their estate for IHT calculation. Speak to a financial adviser for large gifts.