Remortgage to Gift Deposit to Child

How Gifted Deposits Work

A gifted deposit is a sum of money given to a family member — usually a child — to help them buy a property. The key characteristic is that it is a genuine gift with no expectation of repayment and no interest in the property being purchased.

Almost all mortgage lenders accept gifted deposits from immediate family members such as parents, grandparents and siblings. Some lenders also accept gifts from other close relatives, though the criteria vary.

When your child applies for their mortgage, the lender will want to verify the source of the deposit. This is part of standard anti-money laundering checks. They will typically require:

• A gifted deposit letter — signed by you, confirming the money is a gift, that you have no expectation of repayment, and that you will not have any legal interest in the property
• Proof of the source of funds — bank statements or mortgage documentation showing where the money has come from
• Your identification — to satisfy anti-money laundering requirements

The process is well-established, and solicitors who handle property transactions deal with gifted deposits regularly. Your child's conveyancer will guide both of you through the specific requirements.

Remortgaging to Raise the Gift Amount

If you do not have the cash available to gift as a deposit, remortgaging your own property is a common way to raise the funds. By borrowing against the equity in your home, you can release a lump sum to pass on to your child.

The amount you can raise depends on:

• Your property's current market value
• Your outstanding mortgage balance
• Your income and ability to afford higher repayments
• The lender's maximum loan-to-value ratio (typically 85-90%)

It is important to be realistic about how much you can comfortably borrow. Increasing your mortgage means higher monthly payments, potentially for many years. Make sure you factor in possible interest rate increases, changes to your income (particularly if you are approaching retirement), and any other financial commitments.

A mortgage adviser can run the numbers with you and help you understand exactly what additional borrowing would cost on a monthly basis. This gives you a clear picture before making any commitments to your child.

Some parents choose to release equity in stages — perhaps gifting a smaller amount now and topping it up later if their financial situation allows. This can be a more cautious approach that still provides meaningful help.

Tax Considerations for Gifted Deposits

Understanding the tax implications of gifting a deposit is an important part of the planning process. While there is no specific "gift tax" in the UK, there are several tax areas to be aware of.

Inheritance tax (IHT): Everyone can give away £3,000 per tax year without any IHT implications (the annual exemption). You can also carry forward one unused year, meaning up to £6,000 could be given tax-free if you have not used the previous year's allowance. For larger gifts, the seven-year rule applies — if you survive for seven years after making the gift, it falls outside your estate entirely.

Potentially exempt transfers (PETs): Gifts above the annual exemption are classed as PETs. If you pass away within seven years, the gift may be subject to IHT on a tapered basis, reducing to zero after seven years.

Gifts from income: Regular gifts made from your surplus income (not capital) are exempt from IHT, provided they do not affect your standard of living. This is a separate exemption that could be relevant for ongoing financial support.

Stamp duty: If you are not named on your child's mortgage or property title, your gift should not affect their stamp duty liability. First-time buyers may qualify for stamp duty relief on properties up to a certain value.

Given the complexity of tax rules, it is sensible to speak with a tax adviser or financial planner who can assess your specific circumstances and help you structure the gift in the most tax-efficient way.

Protecting Your Gift

Once you have gifted the deposit, you have no legal claim to the money or the property it helps buy. However, there are steps you can take to protect your contribution, particularly if your child is buying with a partner.

Declaration of trust: This legal document records the financial contributions each party has made to a property purchase. If your child and their partner split up, a declaration of trust can help ensure your child's share — including your gifted deposit — is properly recognised in any financial settlement.

Tenants in common: If your child buys with a partner, they can own the property as tenants in common rather than joint tenants. This allows them to own unequal shares reflecting their different contributions, including your gift.

Family loan agreement: Some parents prefer to structure their contribution as a formal loan rather than a gift. This gives them a legal right to repayment, though it can complicate the child's mortgage application as lenders may view it as additional debt. Not all lenders accept this arrangement.

Will considerations: If you have more than one child, think about how the gift affects your estate planning. Some parents adjust their wills to account for gifts already made, ensuring fairness between all their children.

A solicitor specialising in property or family law can advise on the best way to protect your interests while still providing meaningful help to your child. The relatively small cost of legal advice can save significant problems in the future.

What Lenders Look for When You Remortgage

When you apply to remortgage for the purpose of gifting a deposit, lenders will assess your application in the same way as any other remortgage with additional borrowing.

The key areas they examine include:

• Affordability — can you comfortably manage the increased monthly payments alongside your other commitments?
• Credit history — a clean credit record gives you access to the best rates and widest choice of lenders
• Loan-to-value ratio — the more equity you have, the more competitive the rates available to you
• Income stability — lenders want to see reliable, sustainable income to support the borrowing
• Age and mortgage term — some lenders have maximum ages for mortgage repayment, which can affect how much you can borrow

Being upfront about the purpose of the additional borrowing is important. Lenders are very familiar with parents helping children buy property, and it is a perfectly acceptable reason for releasing equity.

If you are self-employed, work on a contract basis, or have a complex income structure, the process may take a little longer as you will need to provide additional documentation. A mortgage adviser who understands your situation can match you with lenders who are most likely to view your application favourably.

Making the Decision

Deciding to remortgage to gift a deposit to your child is both an emotional and a financial decision. While the desire to help is natural, it is important to consider the full picture before proceeding.

Ask yourself these questions:

• Can I genuinely afford the higher mortgage payments for the remaining term?
• How will this affect my retirement plans and savings?
• Am I comfortable with the risk that the money cannot be recovered?
• Have I considered the implications for my other children, if applicable?
• Is this the right time, or would waiting produce a better outcome?

There is no shame in deciding that now is not the right time, or that you can only gift a smaller amount than your child might hope for. Your own financial security matters too, and a good adviser will help you find the right balance between generosity and prudence.

If you do decide to go ahead, the process is straightforward with the right professional support. A mortgage adviser can handle the remortgage, a solicitor can prepare the necessary legal documents, and a tax adviser can help you structure the gift efficiently. Together, they can make sure you help your child in the best possible way while protecting your own financial future.