Contribution of a lump sum gift<\/strong><\/h3>\n\n\n\nHomebuyers who require a mortgage are\nusually asked to provide a deposit of at least 10%, with many lenders asking\nfor a higher amount depending on individual circumstances. In 2025, the average\ndeposit<\/a> paid by a first-time buyer in the UK is around \u00a375,072, which has nearly\ndoubled since 2019.<\/p>\n\n\n\nAs such, many family members are choosing\nto gift either the full deposit or a contribution towards it as a lump sum.\nGifting a lump sum can be done via a letter confirming the money is a gift\nfor proof\nof deposit<\/a> purposes and a bank transfer to the recipient\u2019s\nsolicitor. <\/p>\n\n\n\nHowever, there are tax implications to\nconsider with this option. <\/p>\n\n\n\n
Whilst you can choose to gift as much money\nas you would like, if you want to do so tax free to someone who is not your\nspouse or civil partner, you need to think about the amount you give and when\nit is given. Outside of \u201cexempted\ngifts<\/a>\u201d, everyone in the UK is entitled to a tax-free gifting limit of\n\u00a33,000 during each tax year (6 April to 5 April) and money can be carried over\nto the next tax year but must be gifted within that second year.<\/p>\n\n\n\nOn the flip side, gifting money to your\nchildren now in the form of a contribution to their house purchase can also be\na savvy way to avoid or reduce inheritance\ntax<\/a>. However, it is important to note that any gifts given within 7 years\nof your death will be subject to inheritance tax if they go over the tax-free\nthreshold, so it may be worth giving a number of smaller gifts over a longer\nperiod of time if you plan to assist your children with a property\npurchase. <\/p>\n\n\n\nA loan<\/strong><\/h3>\n\n\n\nAlternatively, you could choose to loan the\nmoney for a house purchase to your relative, but the loan repayments will need\nto be factored into their mortgage affordability calculations and will likely\nreduce the amount which can be borrowed in comparison to a non-repayable gift.\nIt is also important to have a formal loan agreement in place in case\ncircumstances change for either party.<\/p>\n\n\n\n
An offset mortgage<\/strong><\/h3>\n\n\n\nIf you do not have the financial equity to\ngift or loan a lump sum to your children but you do have equity in your own\nhome, you can borrow money against your property in the form of an offset\nmortgage<\/a>. This money can then be either gifted or loaned to your children.\nAgain, you should ensure that there is a formal arrangement in place for doing\nso. You must also ensure that you can afford to make the repayments on your\noffset mortgage from the outset to avoid the risk of losing your own\nhome. <\/p>\n\n\n\nJoint mortgage<\/strong><\/h3>\n\n\n\nIf it will be difficult for your family\nmember to get a mortgage on their own, irrespective of a gift or loan, there is\nalso the option to take out a mortgage together, which is called a joint\nmortgage<\/a>. In fact, anyone can take out a joint mortgage together whether\nthey are related or not.<\/p>\n\n\n\nProviding a higher level of income for the\nmortgage application will offset low credit ratings, allow for a greater amount\nto be borrowed and\/or a better mortgage rate. Your family member also has the\noption to buy you out in future. <\/p>\n\n\n\n
However, it is important to understand all the\nlegal implications, have a plan in place in case circumstances change, and be\nconfident that all parties will be able to meet their repayments to avoid\nheartache, a damaged credit score or, in the worst-case scenario, a property repossession.\nIt can also be helpful to have a written legal agreement in place to specify\nwho is responsible for what when it comes to differing percentages of ownership\nand the upkeep of the property. <\/p>\n\n\n\n
When it comes to any kind of mortgage,\njoint or not, you also need to be aware of the age\ncaps<\/a> mortgage lenders place on their loans. This can affect your\neligibility for certain mortgages since they will take account of the \u201coldest\napplicant\u201d when it comes to their maximum age threshold. However, some lenders will<\/em>\noffer a mortgage which extends into retirement if applicants can provide\nevidence to show that they can afford the repayments.<\/p>\n\n\n\nBuying the property on their behalf<\/strong><\/h3>\n\n\n\nFor some families, it may make more sense\nfor a parent to buy the property in their own name for the child to live in if\ntheir offspring would not be a suitable candidate for a mortgage, even with\nfinancial assistance.<\/p>\n\n\n\n
Whether you purchase the property outright\nor with a mortgage you can then rent it out to your offspring to cover the cost\nof the property upkeep and any mortgage repayments. The benefit of doing so\nmeans all assets stay within the family and your child will have more security\nand lower rental fees than they are likely to have had with an unrelated landlord.<\/p>\n\n\n\n
If you do decide to rent out a property to\nyour family, there are a number of things to consider though. <\/p>\n\n\n\n
Mortgage lenders see it as a higher risk as\na buy-to-let opportunity when the tenant and landlord are related. You will\nalso be subject to additional charges for a second home and \u2018buy-to-let\u2019\nmortgage, pay income tax on the rental income you receive and incur additional\ncosts like capital gains tax and Landlord insurance. <\/p>\n\n\n\n
To protect your family relationship and<\/em>\nyour assets, you will need to have a formal tenancy agreement in place which\ncovers everyone who lives in the property, just as you would with a tenant who\nwas not related to you. This will outline the agreed rental fee, the\nresponsibilities you both have for the property and how it may be used along\nwith arrangements for ending the tenancy should circumstances change. <\/p>\n\n\n\nIf you have bought the property outright,\nyour child will be entitled to inherit the property when you die in accordance\nwith the wishes laid out in your will, so do make sure you have a will in\nplace! <\/p>\n\n\n\n
For more information on selling an\ninherited property and the tax implications which come with the inheritance,\ncheck out our guide to Selling\nan Inherited Property and Capital Gains Tax<\/em><\/a>. <\/p>\n\n\n\n \n \n
As such, many family members are choosing\nto gift either the full deposit or a contribution towards it as a lump sum.\nGifting a lump sum can be done via a letter confirming the money is a gift\nfor proof\nof deposit<\/a> purposes and a bank transfer to the recipient\u2019s\nsolicitor. <\/p>\n\n\n\n However, there are tax implications to\nconsider with this option. <\/p>\n\n\n\n Whilst you can choose to gift as much money\nas you would like, if you want to do so tax free to someone who is not your\nspouse or civil partner, you need to think about the amount you give and when\nit is given. Outside of \u201cexempted\ngifts<\/a>\u201d, everyone in the UK is entitled to a tax-free gifting limit of\n\u00a33,000 during each tax year (6 April to 5 April) and money can be carried over\nto the next tax year but must be gifted within that second year.<\/p>\n\n\n\n On the flip side, gifting money to your\nchildren now in the form of a contribution to their house purchase can also be\na savvy way to avoid or reduce inheritance\ntax<\/a>. However, it is important to note that any gifts given within 7 years\nof your death will be subject to inheritance tax if they go over the tax-free\nthreshold, so it may be worth giving a number of smaller gifts over a longer\nperiod of time if you plan to assist your children with a property\npurchase. <\/p>\n\n\n\n Alternatively, you could choose to loan the\nmoney for a house purchase to your relative, but the loan repayments will need\nto be factored into their mortgage affordability calculations and will likely\nreduce the amount which can be borrowed in comparison to a non-repayable gift.\nIt is also important to have a formal loan agreement in place in case\ncircumstances change for either party.<\/p>\n\n\n\n If you do not have the financial equity to\ngift or loan a lump sum to your children but you do have equity in your own\nhome, you can borrow money against your property in the form of an offset\nmortgage<\/a>. This money can then be either gifted or loaned to your children.\nAgain, you should ensure that there is a formal arrangement in place for doing\nso. You must also ensure that you can afford to make the repayments on your\noffset mortgage from the outset to avoid the risk of losing your own\nhome. <\/p>\n\n\n\n If it will be difficult for your family\nmember to get a mortgage on their own, irrespective of a gift or loan, there is\nalso the option to take out a mortgage together, which is called a joint\nmortgage<\/a>. In fact, anyone can take out a joint mortgage together whether\nthey are related or not.<\/p>\n\n\n\n Providing a higher level of income for the\nmortgage application will offset low credit ratings, allow for a greater amount\nto be borrowed and\/or a better mortgage rate. Your family member also has the\noption to buy you out in future. <\/p>\n\n\n\n However, it is important to understand all the\nlegal implications, have a plan in place in case circumstances change, and be\nconfident that all parties will be able to meet their repayments to avoid\nheartache, a damaged credit score or, in the worst-case scenario, a property repossession.\nIt can also be helpful to have a written legal agreement in place to specify\nwho is responsible for what when it comes to differing percentages of ownership\nand the upkeep of the property. <\/p>\n\n\n\n When it comes to any kind of mortgage,\njoint or not, you also need to be aware of the age\ncaps<\/a> mortgage lenders place on their loans. This can affect your\neligibility for certain mortgages since they will take account of the \u201coldest\napplicant\u201d when it comes to their maximum age threshold. However, some lenders will<\/em>\noffer a mortgage which extends into retirement if applicants can provide\nevidence to show that they can afford the repayments.<\/p>\n\n\n\n For some families, it may make more sense\nfor a parent to buy the property in their own name for the child to live in if\ntheir offspring would not be a suitable candidate for a mortgage, even with\nfinancial assistance.<\/p>\n\n\n\n Whether you purchase the property outright\nor with a mortgage you can then rent it out to your offspring to cover the cost\nof the property upkeep and any mortgage repayments. The benefit of doing so\nmeans all assets stay within the family and your child will have more security\nand lower rental fees than they are likely to have had with an unrelated landlord.<\/p>\n\n\n\n If you do decide to rent out a property to\nyour family, there are a number of things to consider though. <\/p>\n\n\n\n Mortgage lenders see it as a higher risk as\na buy-to-let opportunity when the tenant and landlord are related. You will\nalso be subject to additional charges for a second home and \u2018buy-to-let\u2019\nmortgage, pay income tax on the rental income you receive and incur additional\ncosts like capital gains tax and Landlord insurance. <\/p>\n\n\n\n To protect your family relationship and<\/em>\nyour assets, you will need to have a formal tenancy agreement in place which\ncovers everyone who lives in the property, just as you would with a tenant who\nwas not related to you. This will outline the agreed rental fee, the\nresponsibilities you both have for the property and how it may be used along\nwith arrangements for ending the tenancy should circumstances change. <\/p>\n\n\n\n If you have bought the property outright,\nyour child will be entitled to inherit the property when you die in accordance\nwith the wishes laid out in your will, so do make sure you have a will in\nplace! <\/p>\n\n\n\n For more information on selling an\ninherited property and the tax implications which come with the inheritance,\ncheck out our guide to Selling\nan Inherited Property and Capital Gains Tax<\/em><\/a>. <\/p>\n\n\nA loan<\/strong><\/h3>\n\n\n\n
An offset mortgage<\/strong><\/h3>\n\n\n\n
Joint mortgage<\/strong><\/h3>\n\n\n\n
Buying the property on their behalf<\/strong><\/h3>\n\n\n\n
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