Angel Thomas
Principal Adviser, In2Equity Ltd
A gifted deposit from family is one of the most common ways first-time buyers get on the ladder. But it is also one of the most common reasons a purchase stalls at the last minute - because the paper trail is not right.
Here is exactly what your solicitor and the lender need, and the one sentence that stops a gift being treated as a loan.
Why it matters
Lenders and solicitors are legally required to check the source of every penny of your deposit under anti-money-laundering (AML) rules. If a gift cannot be traced cleanly to its source, the lender can refuse to lend - even after the valuation is done.
The donor declaration
The donor (usually a parent) signs a declaration confirming three things: the money is a gift, it is non-refundable, and the donor has no stake in the property. That last point matters - if the donor expects a share of the property or repayment, it is a loan, not a gift, and it changes the mortgage.
The one sentence that causes problems
If the donor writes 'I expect this back when you can afford it' anywhere in the paperwork, the gift becomes a loan. Lenders treat loans differently - they count against your affordability and some will not accept them at all. The declaration must be unambiguous: it is a gift, with no expectation of repayment.
Source of funds evidence
The donor needs to evidence where the money came from - a bank statement showing the balance building up over time, a sale of shares, a property sale, or savings. A sudden large deposit into the donor's account with no explanation will trigger further checks and can delay completion.
The bank transfer trail
The gift should move directly from the donor's account to your account, then to the solicitor. Avoid cash. Avoid passing through multiple accounts. Each hop is another AML check, and each one adds time.
What we do
We coordinate with your solicitor early to make sure the donor declaration and source of funds are sorted before the lender's underwriter asks. Getting this right upfront saves weeks of delay and, occasionally, a collapsed purchase.