A loan toward a deposit is not a “gifted deposit”
Mortgage lenders ask where the deposit came from. If family money is a gift, they’ll want a signed gifted-deposit letter confirming no repayment is expected and no interest is held in the property. If it’s actually a loan, writing “gift” on that letter to smooth the application is mortgage fraud — the honest route is to declare it as a loan. Many lenders accept family deposit loans; they simply factor the repayments into affordability.
What the declaration protects
Declaring the loan does two quiet jobs beyond honesty. It protects the family: if the borrower buys with a partner and the couple later separates, a signed loan agreement is the clearest evidence the deposit money was a debt to be repaid — not a windfall to be divided. And it protects the siblings: a documented loan keeps the family ledger even, whether it’s repaid in life or settled against an inheritance later.
Example: a £45,000 deposit, declared as a loan
Amara’s parents are lending her £45,000 toward a first flat. Her conveyancer asks about the deposit source; because there’s a signed agreement, the answer is simple and true: a family loan at £250 a month starting after completion. The mortgage lender runs the affordability numbers with that £250 included, and the application proceeds with nothing to unwind later.
That conversation — conveyancer, lender, source-of-funds — goes one of two ways: smoothly, because the paperwork already says what’s true, or awkwardly, because it doesn’t. The agreement is the smooth version.
What the agreement should pin down
- The amount and the date the money moves — with a payment reference on the bank transfer so the advance is provable.
- The repayment plan — instalments or a single date, and what happens if a payment is missed.
- Interest, if any. There’s no statutory cap between family members; the builder warns (never blocks) at 25%+. Remember interest you receive is taxable income.
- Loan, not gift — stated in terms. It protects the borrower’s siblings, the lender’s estate planning, and everyone’s memory.
- Signatures from both sides — electronic signing is valid in England and Wales, and it’s how LendRight finishes the job.
If repayment stalls
Money claims start online wherever you live — through Money Claim Online or the County Court Money Claims Centre — and claims up to £10,000 usually go to the small claims track, built for people without solicitors. If an in-person hearing is ever needed, it’s listed at a county court hearing centre convenient to the defendant, wherever in England and Wales they live. In practice, a signed agreement plus a bank record is usually enough to make the conversation end long before a courtroom.
Under the Limitation Act 1980 you generally have six years from a missed due date to bring a claim on a simple contract — one more reason the agreement should set real dates.
Scotland and Northern Ireland — a different story
If either of you lives in Scotland or Northern Ireland, the builder will tell you honestly that we can’t serve you yet — those are separate legal systems, and a template written for England and Wales isn’t automatically right there. Everything about that decision is on our coverage page.
Put it in writing — kindly.
Draft free in about 4 minutes. Pay the one-time £24.99 only when you send it for signing.
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