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.
Family mortgage loan: lending toward the mortgage, not just the deposit
Not every family contribution stops at the deposit. Parents increasingly help with the mortgage itself — covering a shortfall in the monthly payment, funding a lump sum to reduce the balance, or acting as the reason a lender will offer the loan at all through a guarantor or joint-borrower-sole-proprietor arrangement. These are often grouped under the label family mortgage loan or family-backed mortgage, and they carry a different risk profile from a one-off deposit gift.
The distinction that matters is whether you are lending to your child or lending to the lender’s satisfaction. Money you advance to your child for their mortgage is a private loan between the two of you, and a written agreement is what keeps it one. Standing behind their mortgage as guarantor is a commitment to the bank, enforceable against you, and no family agreement can soften it. People routinely conflate the two, then discover in a bad year that they had signed up for the second.
If you are helping with monthly payments, write it down the same way you would a deposit loan: the amount, whether it accrues, and what happens if the help has to stop. Open-ended support with no record is the arrangement that curdles quietest.
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.
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Create my loan agreementCommon questions
Is a loan toward a house deposit the same as a gifted deposit?
No, and the difference matters to the mortgage lender. A gifted deposit is money with no expectation of repayment, and lenders will usually ask for a signed letter confirming that. A loan toward a deposit is a debt, it affects affordability, and declaring it as a gift when it is not is mortgage fraud.
What is a family mortgage loan?
A loose term covering several arrangements: lending your child money toward their mortgage payments, funding a lump-sum overpayment, or standing behind their borrowing as guarantor. The first two are private loans between you and your child. The third is a commitment to the bank and cannot be undone by a family agreement.
Will the mortgage lender find out the deposit is a loan?
The conveyancer will ask about the source of funds and is obliged to report accurately. Lenders ask directly, and a repayment leaving the account each month is visible in the statements they review. Declaring it correctly from the start is simpler than explaining it later.
Should a deposit loan charge interest?
It does not have to. Most family deposit loans are interest-free, which keeps them simple and creates nothing to report to HMRC. If you do charge interest, that interest is taxable income to you and should be written into the agreement.