Gifted Deposit Buy to Let Mortgage
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Gifted Deposit Buy to Let Mortgage
How would you set the scene for this episode?
I always try to dig out some interesting data to begin the conversation, and contextualise the questions. I found some information from Legal & General suggesting that in 2024 more than 40% of first-time landlords used gifted deposits. I was actually quite surprised by that.
It just shows that this is another growing area – somewhere people and parents are getting involved. The average deposit gift from parents or relatives is £25,600 and over £31,000 in London, which you’d expect.
HMRC will allow gifts of any size, but inheritance tax rules may apply if the donor of the gift were to die within seven years. It sounds a little bleak, but it’s something that people need to consider. You should always get tax advice.
Can I get a Buy to Let mortgage with a gifted deposit?
You absolutely can. Most lenders would expect it to be from immediate family, but that’s not always the case. We assume that it’s going to come from parents or siblings or grandparents, and that tends to be the lender’s expectation too.
We’re recording this in August 2025 and although things change, in the majority of instances, lenders expect a gifted deposit to come from your immediate family.
Can I use a gifted deposit as a first-time Buy to Let investor? Would you expect this more with a first-time investor?
We would, because the common assumption is that an experienced landlord is more cash-rich. It’s not always the case, but most people benefiting from a gifted deposit on Buy to Let would probably be a first-time buyer and first-time landlord.
You can expect quite a bit of scrutiny here from lenders. They chiefly want to make sure you’re not going to live in the property. Buy to Let mortgages are different from residential mortgages in terms of legalities and the mortgage contract itself.
Some lenders completely draw the line here. They just don’t want to accept an application from a first-time buyer, first-time landlord because the risk in their eyes is too high.
Others might reduce the maximum Loan to Value to reflect that enhanced risk. They may bring in enhanced affordability checks. They might underwrite the case based on your income – to make sure that if you did intend to do something untoward, it meets affordability.
What is the Buy to Let mortgage eligibility criteria for a gifted deposit?
Eligibility is relatively straightforward. I mentioned previously that the gifted funds need to come from a close family member. Not always, but that’s very often the case.
It should also be a gift in the truest sense of the word – so it’s not repayable, it’s not a loan, and sometimes that needs to be documented. Lenders expect you to have a clean credit history, too. So check your credit file, whether that’s with Experian, Equifax, TransUnion or any of the other credit agencies.
As always with Buy to Let, they want you to demonstrate rental affordability on the loan. So there’s quite a bit there in terms of the eligibility criteria.
Do all mortgage lenders accept gifted deposits for Buy to Let mortgages?
No, not all lenders do. Some are wary of it or don’t like the idea. They want to see the applicant contributing something financially. High street lenders tend to be a little bit more open to it as long as a family member is involved.
Some specialist lenders would look at things like inheritance, which is a grey area. But a broker here is going to be absolutely key. You’re going to need to talk to a mortgage advisor that’s experienced with first-time landlords, first-time buyers and Buy to Let with gifts.
Good advice in this area is really key.
Do I need a gifted deposit letter for a Buy to Let mortgage? What needs to be included in it?
Lenders have different requirements, but you will usually need a letter from the person gifting the funds. It would need to include their name, their address and relationship to you.
It would also need to include specific wording that this is a gift, it’s not repayable and the gifter will have no interest in the property. They might also need to clarify that the funds are from a legal source. That might sound silly, but it is a technicality and some lenders do expect that.
You may also need bank statements alongside it to show that the gifter has the funds and where they’ve come from.
Can I only receive gifted deposits from family members for Buy to Let?
Usually, yes. The expectation is that it would come from parents, siblings, grandparents or a spouse or partner. If the person that’s planning to help you out here falls into one of those groups, you should be okay.
Gifts from friends or distant relatives are quite niche. It’s not out of the question, but I think you need to be aiming for one of those four key groups.
Is there a limit on how much can be gifted for a Buy to Let deposit?
There’s no legal limit, but as we speak today in August 2025, you should be contributing at least some of the deposit yourself.
A lender probably wouldn’t want a scenario where you’re buying the property with a mortgage from the lender and the entire deposit is a gift. They want to see you make a contribution towards that deposit.
Some will allow 100% gifted deposit, but it’s niche. Most expect you to put in 5% to 10% of the purchase price from your own funds.
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Do you have to pay tax on a gifted deposit when purchasing a Buy to Let?
That’s really a question for a tax advisor. Anybody who’s considering this should talk to a tax advisor, an accountant or a property specialist to get qualified advice around it. It’s so important. The sums involved are normally very high and the risk of getting it wrong is also very high.
Generally speaking, if somebody is gifting you some money and they die within seven years, the gift may be subject to inheritance tax. That’s according to HMRC’s guidance. Larger gifts might also trigger anti-money laundering checks – requiring additional ID checks and verification on the donor and the gift.
Try not to stray into this area without getting advice, because there are potential pitfalls.
What will happen if a gifted deposit is not declared for a Buy to Let mortgage?
It’s serious. There are legal and mortgage fraud implications here – effectively you’d be obtaining a mortgage with untruths. You really need to be mindful of this.
A lender could decline your application and you could be added to databases that you don’t want to be on. There could be future legal disputes if complications arise. It’s a big challenge, so don’t risk it.
Always declare any gift upfront to your broker, lender and solicitor. You won’t fall foul of anything if you just present all the information at the outset and everybody is well aware of exactly where those funds are coming from.
How do solicitors check the source of funds?
The person who’s helping you out with this deposit should expect to provide ID and proof of address as a minimum. Potentially they will need bank statements as well, to show those funds are held in their name.
The gift letter that we mentioned earlier is almost always a given. If they’re ready with all of that information it should, in theory, speed up any conversations with the solicitor and also with the mortgage lender.
What is the seven-year rule for gifted deposits for Buy to Let mortgages?
We’ve touched on this, but it’s worth reiterating because it’s so important. Again, talking to an accountant around this is absolutely paramount.
Effectively, if the person gifting you the deposit funds dies within seven years, the value of that gift may count towards their estate and potentially be subject to inheritance tax. There is something called tapering relief, which an accountant will talk to you about.
This doesn’t necessarily affect the mortgage process, but it is really important from a tax planning perspective for that individual and for you. It’s a well-known tax rule in the UK, but it’s definitely worth familiarising yourself with it further and talking to an accountant for further guidance.
What is the alternative to gifted deposits for Buy to Let mortgages?
I’ll just set out some other types of deposit that we typically see. Personal savings is the most obvious one, and often people remortgage another property. Perhaps you have another property, be it your main residence or another investment property. If there’s equity in it that’s accessible by a remortgage, you could potentially access that.
Inheritance is something we often see. People inherit from a grandparent, for example, and put that down as a deposit. Or it could be a joint venture with somebody else – potentially a business partner.
There are lots of different ways of pulling together a deposit, as people are probably well aware.
What are the pros and cons of a gifted deposit for a Buy to Let mortgage?
Let’s look at the pros first. The first thing is that it’s potentially easier and quicker to get on the property ladder if you haven’t got to come up with all that money yourself.
It reduces your borrowing needs, so your mortgage is smaller, and therefore you could meet higher deposit thresholds and unlock better rates. Effectively, you’re accessing better products.
Looking at the other side of that, it might restrict your lender choice because not all lenders are happy with this situation. There are additional anti-money laundering checks and additional paperwork. And, of course, we can’t ignore the potential tax implications if this isn’t planned well.
The cons are all avoidable, but they’re definitely not to be ignored.
You’ve definitely demonstrated how a mortgage broker can help here. Is there anything else you’d like to add?
A broker is going to be absolutely key to this. With any mortgage that’s slightly out of the ordinary, go and get advice. A broker is always a good place to start, but when it’s complex like this, you’ll need us to guide you on which lenders might accept a gifted deposit.
If you’re a first-time buyer and first-time landlord, that adds another layer of complexity.
A broker will help you structure the application, get all the documents right, talk to your solicitor, talk to your tax advisor, and probably just save you time, money and reduce your stress – so go and get that advice in the first instance.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.
For specialist tax advice, please refer to an accountant or tax specialist.