Gifted house deposits: what do you need to think about?

A gifted deposit is an amount of money given to someone buying a house, to cover some, or all, of their deposit. Unlike loans, gifted deposits are given with the understanding that the money does not need to be given back.

Gifted deposits are often accepted by mortgage lenders when they’re given by family members, such as parents or grandparents. For example, Newcastle Building Society’s lending policies welcome deposits gifted from parents and other close family relatives (excluding First Step product), as long as they don't want their money back and the underwriter is happy to proceed. All lenders will need proof of deposit as part of the application.

Anyone that applies for a mortgage will need to give proof of their deposit money as part of the process.

When using a gifted deposit, applicants will need to show proof that they been given any deposit money as a gift. Often, you will need to show a signed confirmation by the giver, saying:

• What their relationship to the applicant is;
• The amount of money they wish to gift;
• That the gift does not need to be paid back;
• That they will hold no legal charge over the property.

The giver may also need to provide a bank statement, as proof of where the money has come from. This is part of standard money laundering checks, and nothing to be worried about.

The amount gifted as a house deposit can be as much, or as little, as the giver chooses.

However, there could be an effect when it comes to tax. If the giver passes away within seven years of the money being gifted, the home buyer may need to pay Inheritance Tax on the gifted deposit. This however only applies if the amount of the giver's estate (including the gifted deposit­) is past the threshold for inheritance tax being due.

Here at Newcastle Building Society, our friendly, approachable team are experienced with processing gifted deposits as part of the mortgage application process and will be able to help you every step of the way.

For all of our useful guides and tools to help you on your journey to buying your first home, visit our first time buyers page. To compare the different types of mortgage deals that are currently available, get in touch with one of our mortgage advisers to begin your mortgage application process.