Gifted deposits: what the giver is signing

What a gifted deposit letter is

Lenders need to know where a buyer’s deposit has come from. If a relative or friend is giving money, the lender will ask them to sign a gifted deposit letter (sometimes called a gift declaration). It usually confirms:

• the amount of the gift and who it’s for
• that it is a gift, not a loan, and doesn’t have to be repaid
• that you won’t have any share in, or claim on, the property
• that you aren’t expecting anything in return
• whether you’ll be living in the property

What you’re giving up

Signing means you’re very unlikely to be able to get the money back. If the buyer later sells, separates from a partner, or loses the property in a repossession, you won’t be able to claim your gift back from the sale.

If you want any chance of getting money back, it isn’t a gift. Lenders treat loans very differently, and many won’t accept a borrowed deposit at all. Be honest with the lender about what you intend.

If you’ll live in the property

If you’ll live in the home you’re helping to buy, the lender will usually also ask you to sign an occupier’s consent form. That means you agree the lender’s mortgage comes before any right you have to live there.

Proof of funds

Expect to be asked for ID and bank statements showing where the money came from, often going back several months. This is part of anti-money laundering checks by the buyer’s conveyancer and the lender. Large or unusual deposits into your account may need explaining.

Tax

A gift may have implications for inheritance tax. There are annual exemptions, and gifts can fall outside your estate if you survive a certain number of years, but the rules depend on your circumstances. If the gift is large, it’s worth getting tax advice. Your ILA solicitor will flag this but won’t usually give detailed tax advice.

Gifts between partners and family

If the buyer is your partner and you’re not on the title, think carefully. You may prefer to be a joint owner, or to record your contribution in a declaration of trust, rather than make a gift. A solicitor can talk you through the options.

Do you need independent legal advice?

Not every lender requires it, but many do, particularly for large gifts or where the giver will live in the property. Even where it’s optional, a short conversation with a solicitor makes sure you understand you’re giving up any claim to the money. See ILA for a gifted deposit.