49% of people under 35 buy their first home with some help from their family. Sometimes it’s a loan, other times it’s a gift.

But what happens when you get money for a deposit as a gift?

Do you have to tell someone?

Is the house fully yours?

Is it even legal!? (It is).

Here’s everything you need to know about buying your first home with a gifted deposit.

What’s a gifted deposit?

A gifted deposit is when someone gives you all, or some of the money you need for a home deposit.

Unlike a loan, you’re not expected to pay that money back in any way. And the person who gives you the money doesn’t own part of the home you buy.

It’s just a very helpful, totally life-changing gift.

Who can give you a gifted deposit?

Technically, anyone can give you a deposit, but most mortgage lenders prefer if the money comes from a close relative like a parent, a sibling or a grandparent.

Each one is different, so always ask.

How do you get a mortgage with a gifted deposit?

First, you have to let your mortgage lender and solicitor know that all or part of your deposit is gifted. This protects you in the future and allows the mortgage lender to carry out anti-money laundering checks.

To do this, the person who’s giving you the money has to send your mortgage lender a few documents, like:

  • Proof of ID
  • Proof of address
  • Bank statements
  • Evidence of the source of the money
  • Proof that they’re not ‘depriving themselves of capital’ which would then make them qualify for certain state benefits
  • A gifted deposit letter

What’s in a gifted deposit letter?

  • Their name
  • Your name
  • The total amount of the gift
  • A statement that it’s a gift
  • Confirmation that the gift giver has no financial stake in the property
  • Confirmation that the gift giver is financially able to give away this amount of money (and still be okay themselves).

Once the letter has been signed by a witness, your solicitor will send it to the mortgage lender as part of your application.

How much can someone give you as a gifted deposit?

Someone can give you as much as they want towards your deposit, but there are some things you’ll want to keep in mind:

First, whether your mortgage lender allows you to have a fully-gifted deposit, or if you have to prove that some of the deposit comes from your own savings.

And then, there’s inheritance tax.

What’s the deal with gifted deposits and inheritance tax?

Each person in the UK is allowed to gift up to £3,000 per year, inheritance tax-free (that could be £3,000 from your mum and £3,000 from your dad).

Any unused allowance can be carried over, but only from the previous year. That means you could get a gifted deposit of up to £6,000 from someone, without having to worry about inheritance tax.

If it’s more than that, and the person who contributed to your deposit sadly dies within 7 years of giving you the money, your gifted deposit is then classed as part of their estate. If their total estate is worth more than £325,000, you might have to pay inheritance tax. Read more about inheritance tax on the gov website.

Can you use a gifted deposit when buying a home with someone else?

You sure can.

But if your gifted deposit is just for you (e.g. not a joint gift) then it could be a good idea to get a declaration of trust.

A declaration of trust is a legally binding document for people who are buying a home together. In this document, you can specify who the money was given to. So, if things don’t work out, you and your money are better protected.

Whether you’re getting some help to build your deposit, or saving for a home on your own, here are 16 ways our app can make it easier for you.