Gifted Deposit Letter

Your mortgage lender requires a gifted deposit letter during the conveyancing process if you are obtaining a gift from your parents or a friend. The reason for the letter is so that the mortgage lender can prove that the money is a gift and not in fact a repayable loan. The document is also known as a deed of gift.

The gift letter for mortgage should be completed and provided to the conveyancing solicitor along with the gifter's proof of ID, address and proof of funds. We explain in this article here - How to prove source of funds.

7 stages of a Gifted Deposit Letter?

1
Who, relationship and address

The parties declare the full name of the person giving and receiving the gift, their relationship to them and the purpose.

For example: We are assisting our daughter, whose full name is Kirstie Smith, in their purchase of 41 An Example Road, B4 1NE.

2
Gift amount

The parties declare the gift amount and this should include all money being gifted toward the purchase, including the gifted deposit and purchase costs.

For example: We are gifting her £25,000.

3
The reason for the gift

The parties declare the reason why they are gifting the money. For parents gifting money to their children, this is normally out of love and affection or a duty to help them buy their first home. This is very common. What is less common, is for a friend to gift money to you, as there isn't a normal reason to gift a large sum of money and not expect to get this repaid at some point in the future.

For example: We understand that by gifting the sum to her, that our action is a gift of love and affection.

4
The gift is not repayable

The parties declare that the money is a gift and is not repayable. This declaration ensures that the money cannot be called upon in the future, because it now belongs to the home buyer.

For example: We declare that the gifted deposit is unconditional, non-repayable and does not give us any rights over the property and will not prejudice the security of their Mortgage Company, Nationwide Building Society.

5
You are solvent

The parties declare that they are solvent. The reason for this is that if the parties are made bankrupt up to 5 years after the gift, then the administrator could force a sale of the property to repay the debts. We explain this in more detail in our article on - Insolvency Act Rules.

For example: We hereby confirm that at the date of this Declaration we are solvent, our assets exceed our liabilities and we have no reason to believe that we will become bankrupt.

6
Independent Legal Advice

The parties declare that they understand the solicitor acting for the buyers doesn't provide them with any legal advice. The independent legal advice would be to explain the implications of gifting large sums of money and to confirm if they can financially afford this.

For example: We hereby confirm that we are aware that your solicitor cannot provide us with any legal advice in this matter and we have been advised by your solicitor to obtain independent legal and financial advice before proceeding further.

7
Signed and witnessed

The gifted deposit letter is signed by the parties in front of witnesses who in turn sign the letter. The witness cannot be a family member or someone who benefits from the transaction. A friend, neighbour or work colleague are fine to use. If you are overseas, then the witness should be the notary public or solicitor used to verify your ID.