Gifted deposit from parents: gift or loan, gift letters and recording it fairly for both of you

What is a gifted deposit, and how is it different from a family loan?

A gifted deposit is money someone gives you towards the deposit on a home that you never have to pay back. Most often it comes from parents, sometimes from grandparents or other relatives. A family loan for a deposit is money you, or you and your partner, are expected to repay, whether in instalments or in one go when you sell.

The difference matters to three groups of people at once:

• Your lender, which asks where your deposit comes from and whether the giver expects anything back.
• Your parents, who need to know whether they’re giving the money away for good or expecting it back.
• You and your partner, who need to agree whose money it counts as if you sell or split up.

Question	Gift	Loan
Paid back?	No	Yes, on agreed terms
Lender told?	Yes, with a gift letter	Yes, before you apply
How to record it	Gift letter	Written loan terms

Both are fine. What causes trouble is money handed over with nobody quite sure which it was. HM Land Registry’s guidance notes that when someone pays for land with money provided by somebody else, a trust can arise by law. So it’s worth being clear from the start whether family money is a gift or a loan, and to whom.

What does a gift letter from parents say, and what do lenders check?

Lenders usually ask the person giving the money, often a parent, to sign a short declaration, called a gift letter or gifted deposit letter. Many have their own form. Yorkshire Building Society, for example, says the giver confirms their name, address and relationship to you, the amount, where the money comes from, that you don’t need to repay it and that they have no stake in the property.

Nationwide’s form goes further. The giver confirms the money is an unconditional, non-refundable gift and that they will have no rights or interest in the property. If they plan to live in the home, they agree to sign a consent form for the mortgage. They also confirm they understand the importance of independent legal advice.

Expect checks too. Nationwide’s form and Yorkshire Building Society’s guide both ask where the money comes from. Nationwide’s form says the giver may be asked for proof that they have the money, and Yorkshire Building Society says the documents can include the giver’s ID and proof of funds, to help with anti-money laundering checks.

What if your parents want the money back?

Then it’s a loan, or a gift with conditions, and you need to say so. Some parents are happy to give money outright. Others want it back if the home is sold, or if the relationship ends. Both are reasonable, but they need different paperwork.

You have two honest options:

1. Make it a true gift. Your parents sign the lender’s gift letter and the money is yours. If they’d like it to stay with you rather than be shared with your partner, that’s something you and your partner record between you (see below), not a hidden condition on the gift.
2. Make it a declared family loan. Tell your lender or broker before you apply and ask whether they’ll accept it. Nationwide’s gifted deposit form, for example, allows family money whose only condition is that it is repaid in full if the home is sold, with no interest charged and no repayments in the meantime. Don’t assume every lender works the same way.

Don’t sign a gift letter for money you all expect to be repaid. The letter is a statement to your lender. Under section 2 of the Fraud Act 2006, dishonestly making a false or misleading representation, intending to make a gain for yourself or someone else, or to cause a loss or risk of loss to another, is fraud. Being open lets the lender decide on the real facts.

If it is a loan, put it in writing: how much, who owes it (one of you or both), whether there’s interest, and when it’s repaid, for example on a sale or a split. Your parents should get their own legal advice if they want security over the home.

If one of you has a Lifetime ISA. GOV.UK says you can’t use Lifetime ISA savings to buy a home if you’re getting a private mortgage from a relative: a parent, grandparent, child, grandchild or sibling, or someone married to or in a civil partnership with one of them. So if family would lend you the money for the home itself, instead of a bank or building society, check this before you agree. A gift towards the deposit isn’t a mortgage, so it isn’t caught by this rule. Our guide to using a Lifetime ISA when buying with a partner covers the other conditions.

Whose money is it if you’re not married?

This is where unmarried couples need to think hardest, because the law doesn’t sort it out for you. There is no such thing as common-law marriage in England and Wales, however long you live together. If you split up, the court can’t share out your money the way it can on a divorce. It looks at property law instead.

For a home in both your names, the Supreme Court has said the starting point is that you own it jointly, in equal shares. That stays the case unless there’s evidence you both intended something different. So if Alex’s parents give £20,000 and nothing is written down, the starting point is that it’s shared equally with Jordan.

That may be exactly what everyone wants. Plenty of parents are happy to help the couple, not just their own child. But it should be a choice, not an accident. There are three common answers:

• It counts as one partner’s contribution. The family money is part of that partner’s deposit, and can come back to them first if you sell.
• It counts as a gift to you both. Each of you is treated as having put in half.
• It just becomes part of the home. You own the home in equal shares and the family money isn’t tracked.

Protecting the money here means making it clear for everyone, not guarding it from your partner. A written record helps the partner whose family gave the money, and it helps the other partner too, because they know exactly where they stand. If your partner pays more of the bills, or has family help of their own later, the same rules can cover that.

How does it work with £20,000 from one partner’s parents?

Alex and Jordan buy a £300,000 home with a £250,000 joint mortgage. Alex puts in £40,000: £20,000 of savings and £20,000 given by Alex’s parents. Jordan puts in £10,000. A few years later they sell for £330,000 with £230,000 of the mortgage left, so £100,000 is left over.

How Alex and Jordan's £100,000 splits after selling

What they agreed	Alex gets	Jordan gets
Nothing written down, equal shares	£50,000	£50,000
Family money back to Alex first, rest equal	£60,000	£40,000
Gift to both, deposits back first	£55,000	£45,000
All deposits back first, rest equal	£65,000	£35,000

How each row works:

• Equal shares: £100,000 split in half, £50,000 each. This is the starting point if nothing is written down.
• Family money back to Alex first: Alex gets the £20,000 from the parents back, which leaves £80,000. That’s shared equally, £40,000 each, so Alex gets £60,000 and Jordan £40,000.
• Gift to both, deposits back first: the £20,000 counts as £10,000 each, so Alex put in £30,000 and Jordan £20,000. Both get that back, which leaves £50,000, shared £25,000 each. Alex gets £55,000 and Jordan £45,000.
• All deposits back first: Alex gets £40,000 back and Jordan £10,000, which leaves £50,000, shared £25,000 each. Alex gets £65,000 and Jordan £35,000.

Compared with writing nothing down, recording the family money as Alex’s own and repaying it first moves £10,000 from Jordan to Alex. Treating everything Alex put in as Alex’s moves £15,000. None of these is wrong. The point is to pick one together, while it’s easy to talk about.

If it was a loan, not a gift. Say instead the £20,000 was a loan to both of them, to be repaid to Alex’s parents on a sale. It comes off the top first: £100,000 less £20,000 leaves £80,000, or £40,000 each on equal shares. If it was a loan to Alex alone, Alex repays it out of Alex’s share.

If the home is worth less. Say they have to sell after two years for £280,000 with £240,000 still owed, leaving £40,000. With family money back to Alex first, Alex gets £20,000 and the other £20,000 is shared, so Alex gets £30,000 and Jordan £10,000. With equal shares, it’s £20,000 each. Agree what happens if there isn’t even enough to repay the family money.

Illustration only: these ignore selling costs, tax and who paid what towards the mortgage. To try your own numbers, put each partner’s full deposit into the deposit split calculator. Its “deposits back first” result matches the last row above.

How do you record family money so it’s clear for everyone?

There are four pieces of paper, and each does a different job.

1. The gift letter or loan agreement. This is between the giver and the lender (or the giver and you). It says whether the money is a gift or a loan. It doesn’t say how the money is shared between you and your partner.

2. How you own the home. When you buy, your conveyancer helps you fill in the transfer form, the TR1, which says whether you own the home as joint tenants or tenants in common. Advicenow explains that tenants in common can own the home in any shares you agree. If family money is meant to come back to one of you first, tenants in common is usually the way to show it. Our guide to joint tenants or tenants in common explains the choice.

3. A declaration of trust. A signed document setting out your shares, or a formula such as “Alex’s family money back first, then the rest split equally”. The law says a declaration of trust over land must be proved by signed writing. HM Land Registry’s guidance says the document itself doesn’t need to be sent with the registration application, so keep it safe. Your conveyancer or a solicitor can prepare it when you buy.

4. A couples agreement. A written couples agreement (also called a cohabitation agreement or a house buying agreement) records the rest of the picture: who gave the money, whether it was a gift or a loan, whose contribution it counts as, what happens if the home is worth less, and what happens if more family money comes in later, for a new kitchen, say. Courts can take an agreement like this into account. Advicenow says a court will usually follow one if it is fair and you were both open about your finances. See what a couples agreement for buying a house covers and how your agreement counts.

Wills matter too. If you own as tenants in common, each share passes under that person’s will, and an unmarried partner doesn’t inherit automatically without one. If your parents’ wish is for the money to stay with you, or to go to your partner if you die, your will is where that’s decided.

What about inheritance tax and Stamp Duty?

Inheritance tax. There’s no tax to pay when your parents give you money. GOV.UK says no tax is due on a gift if the giver lives for 7 years after giving it (unless the gift is part of a trust). If they die within 7 years, the gift can count towards inheritance tax on their estate. Gifts made in those 7 years count towards the tax-free threshold, which is £325,000 for most people, and tax is only due on what’s above it. Some gifts are free of inheritance tax straight away:

• The annual exemption: each person can give away £3,000 a tax year. Any unused part can be carried forward one year only, so two parents who gave nothing last year could give up to £12,000 between them this year.
• Small gifts: up to £250 per person per tax year.

GOV.UK suggests keeping a record of what was given, to whom, its value and when. A short note signed by the giver, kept with your couples agreement, does that job.

Stamp Duty. In England, Stamp Duty Land Tax is usually worked out on the price of the home, so a gift towards the deposit doesn’t change it. It can change if a parent buys with you and goes on the title:

• First-time buyer relief only applies if you and everyone you’re buying with are first-time buyers.
• Higher rates usually apply if buying means you’ll own more than one home, and if any joint buyer has to pay them, they apply to the whole purchase.

In Wales you pay Land Transaction Tax instead. It has its own rates and no first-time buyer relief, so check the Welsh Government’s guidance.

What should you do next?

1. Ask your parents what they intend. A gift for good, a gift to you or to you both, or a loan? Do it before anyone signs anything.
2. Tell your lender or broker early. If it’s a gift, get their gift letter or form. If it’s a loan, declare it and check they’ll accept it.
3. Agree between you whose money it is. Use the deposit split calculator to see the numbers. The free 10-minute conversation asks about family money, and your answers stay on your device.
4. Tell your conveyancer. Say how you want to own the home and ask about a declaration of trust that records the family money.
5. Write it down. Put what you agreed in a couples agreement you both sign, and keep it with the gift letter.
6. Make wills, especially if you own as tenants in common.

See a solicitor if your parents want the money back or a share of the home, if they’ll live there, if the sums are large, if either of you has children from a previous relationship, or if anyone feels under pressure. One solicitor each for the two of you is best, and your parents may need their own too.

For more on splitting the rest of the deposit, read our guide to an unequal deposit when buying a house together, and if you’re not sure the paperwork will count, read whether a couples agreement counts in court.