Bank of Mum and Dad: How Family Help With a Home Deposit Works

The “Bank of Mum and Dad” means parents or other relatives helping someone financially, most commonly with a deposit for a first home. It is not a bank or one official scheme. The help may be an outright gift, a family loan, a guarantor or family-assisted mortgage, or a joint purchase.
The right structure matters. A gift usually carries no right to repayment or ownership, while a loan creates a debt and a joint purchase can give the family member a legal or beneficial interest in the property. Everyone should tell the mortgage lender and conveyancer exactly what has been agreed before money changes hands.
Before providing or accepting family money: agree whether it is a gift, loan or investment; check the mortgage lender’s rules; document the arrangement; and take independent legal, mortgage and tax advice where appropriate. Nobody should put their own housing, retirement or emergency savings at risk to help with a purchase.
What does “Bank of Mum and Dad” mean?
“Bank of Mum and Dad” is an informal term for financial help from parents to their adult children. Grandparents and other relatives may provide similar support, so “Bank of Family” is sometimes a more accurate description.
The money might help with a house deposit, buying costs, rent, education or another major expense. In property discussions, the phrase usually refers to helping loved ones onto the property ladder. It does not identify the legal arrangement: the family still needs to decide whether the contribution is a gift, loan, guarantee or ownership stake.
How does the Bank of Mum and Dad work when buying a home?
Family help normally works in one of four ways: money is gifted, money is lent under agreed terms, a relative supports a specialist mortgage, or the relative buys an interest in the property. The buyer then applies for a mortgage and discloses the arrangement to the lender and conveyancer.
Type of family help
Does the money need to be repaid?
Does the relative own part of the home?
Main issue to resolve
Outright gifted deposit
No
Normally no
Evidence of the gift and its source
Family loan
Yes, under the agreed terms
Not automatically
Whether the mortgage lender accepts it and how repayments affect affordability
Guarantor or family-assisted mortgage
Not unless the borrower fails or the product requires it
Usually no, but money or property may be at risk
The guarantor’s maximum liability and release conditions
Joint purchase or declared beneficial share
Not necessarily
Yes
Ownership shares, tax, sale and exit arrangements
These routes are not interchangeable. Describing repayable money as a gift can mislead the lender and leave the family without a suitable agreement. Describe the real arrangement from the outset.
Is a gifted deposit different from a family loan?
Yes. A genuine gifted deposit is given without an expectation of repayment and normally without the donor receiving a share of the property. A family loan remains repayable, even if it is interest-free or repayment will not begin immediately.
Mortgage lenders commonly ask for a gifted-deposit letter or declaration. It may need to confirm the amount, relationship between donor and buyer, source of the money, that repayment is not expected and whether the donor will have any interest in the property. The lender and conveyancer may also require identity and source-of-funds evidence as part of their checks.
A family loan must be disclosed. Some lenders will not accept borrowed deposits; others may consider the outstanding debt and monthly repayment when assessing affordability. Never call a loan a gift simply to fit a lender’s policy.
What evidence is needed for a gifted house deposit?
A buyer will usually need a signed gift declaration plus evidence of the donor’s identity and where the money came from. Exact requirements vary between mortgage lenders and conveyancers, so request the checklist before transferring funds.
Evidence may include:
a letter confirming the gift and that it is not repayable;
the donor’s name, address and relationship to the buyer;
bank or savings statements showing the source and movement of the funds;
evidence explaining a large recent credit, such as a property sale or investment withdrawal;
proof of identity and address; and
confirmation that the donor will not own part of or place a charge over the property, if that is the arrangement.
Large unexplained cash deposits or a chain of transfers between accounts can slow source-of-funds checks. Keep records and tell the conveyancer early if money comes from abroad, a trust, a business, cryptocurrency, an inheritance or several relatives.
How should a family loan be documented?
A family loan should be recorded in a written agreement covering the amount, repayment terms, interest if any, missed payments and what happens if circumstances change. Significant loans deserve independent legal advice for both sides.
At minimum, discuss and record:
Point to agree
Questions the document should answer
Amount and purpose
How much is being lent and is it only for the deposit or also buying costs?
Repayment
When do payments start, how much is due and can the borrower repay early?
Interest
Is the loan interest-free, fixed or variable, and could interest create tax consequences?
Security
Is the loan unsecured or is any charge or beneficial interest intended? Will the mortgage lender permit it?
Changed circumstances
What happens after unemployment, illness, separation or a missed payment?
Sale or remortgage
Must the balance be repaid and in what order are sale proceeds distributed?
Death or incapacity
Does the debt remain payable to the lender’s estate and who can make decisions?
Records
How will transfers, repayments and the outstanding balance be evidenced?
MoneyHelper recommends putting significant lending between family and friends in writing and considering what happens if the borrower’s circumstances change. A clear agreement protects the relationship as well as the money.
Can parents protect a house deposit gift?
A parent cannot normally make an unconditional gift and also retain an automatic right to repayment. If protection is required, a solicitor can explain alternatives such as a documented loan, a declaration of trust or an ownership share, subject to the mortgage lender’s consent.
The appropriate protection depends on the intended result. For example, the family may want to protect an unequal contribution if a couple separates, specify how sale proceeds are divided, or ensure a loan is repaid from a future sale. These arrangements can affect mortgage availability, tax, first-time-buyer relief and estate planning, so they should not be created from an online template without advice.
If the buyer is purchasing with a partner, the couple may also need advice about joint ownership and a cohabitation agreement. In England and Wales, joint tenants and tenants in common hold property differently; Scotland and Northern Ireland use different property law and terminology.
What is a guarantor or family-assisted mortgage?
A guarantor or family-assisted mortgage uses a relative’s income, savings or property to support the buyer’s application. The relative may promise to cover specified payments, place savings in a linked account or accept a charge against their home, depending on the product.
The relative does not necessarily become a joint owner, but they can face a real financial loss if the borrower fails to pay. Savings may be locked for a period, and property used as security may be at risk. Product names, eligibility and release conditions differ between mortgage lenders.
Both borrower and supporter should understand:
the maximum amount for which the supporter can be liable;
whether liability covers missed payments, the full loan or other costs;
how long savings are locked or security remains in place;
what loan-to-value or repayment conditions release the supporter;
what happens after arrears, death, separation or a remortgage; and
whether independent legal advice is required.
Do not assume the guarantee will end when the buyer’s income rises. Use the written mortgage terms and ask the lender to explain the release process.
Does a gifted deposit affect Inheritance Tax?
It can. An outright gift to an individual is generally a potentially exempt transfer for UK Inheritance Tax: if the donor survives seven years, it is normally outside their estate for this purpose. If the donor dies within seven years, the gift may need to be considered when the estate’s tax position is calculated.
This does not mean every gifted deposit creates an immediate tax bill. Available exemptions can include the £3,000 annual exemption, unused annual exemption carried forward for one tax year, certain wedding or civil-partnership gifts, small gifts and qualifying normal gifts made from income. The rules and the donor’s previous gifts matter.
Keep a record of the date, amount, recipient and exemption used. GOV.UK explains the current Inheritance Tax rules for gifts. A family loan is normally still an asset of the lender’s estate unless it has been validly repaid, released or otherwise dealt with. Take estate-planning or tax advice for large gifts, trusts, retained benefits or complicated family circumstances.
Do you have to declare a gifted deposit to HMRC?
The recipient does not usually file a special HMRC return merely because a parent gives them a cash deposit, but the gift still needs to be disclosed to the mortgage lender and conveyancer. The donor and their executors should retain records because the gift may be relevant to a later Inheritance Tax calculation.
Different reporting or tax issues can arise where the arrangement involves income, interest, a trust, overseas assets, a transfer of property rather than cash, or the donor keeps a benefit. Ask a tax adviser or solicitor about the specific transaction rather than treating a cash-gift answer as universal.
Could joint buying affect Stamp Duty or first-time-buyer relief?
Yes. If a parent becomes a joint owner, their existing property ownership can affect the land-transaction tax payable and the buyer’s access to first-time-buyer relief. A cash gift alone does not normally make the parent an owner.
England and Northern Ireland use Stamp Duty Land Tax, Wales uses Land Transaction Tax and Scotland uses Land and Buildings Transaction Tax. The rates, surcharges and relief rules differ. For an England or Northern Ireland purchase, GOV.UK states that the higher-rate test applies to all buyers in a joint purchase; one joint buyer’s other property can therefore affect the entire transaction.
Ask the conveyancer to calculate the tax before agreeing a joint purchase. Also check how ownership could affect future sales, Capital Gains Tax, means-tested support and estate planning. The cheapest-looking structure at the deposit stage may not be the simplest overall.
Could giving money affect care-cost assessments or benefits?
Possibly. A local authority can consider whether a person deliberately reduced their assets to avoid care charges. There is no simple seven-year safe period for deprivation-of-assets assessments, and the Inheritance Tax seven-year rule answers a different question.
The decision depends on intention and circumstances at the time of the gift. A person is allowed to make gifts, but should not assume that transferring savings will prevent those assets being considered in a future care assessment.
Means-tested benefits can also be affected by giving away money or taking on a beneficial interest in property. An attorney acting under a lasting or enduring power of attorney has restricted gifting powers and must act within their authority and the donor’s best interests. Seek specialist advice before making a substantial gift for someone who may lack capacity or need care.
What are the advantages and disadvantages of using the Bank of Mum and Dad?
Family help can bring home ownership within reach sooner, increase the available deposit and potentially improve the mortgage options offered to the buyer. It can also transfer financial risk into a family relationship and create unexpected legal, tax or retirement consequences.
Possible advantages
Possible disadvantages
A larger deposit may reduce the amount borrowed and loan-to-value ratio
Parents may reduce their retirement funds or emergency buffer
The buyer may reach the property ladder sooner
A loan repayment may reduce mortgage affordability
Terms of a family loan may be more flexible
Expectations can cause conflict, especially after separation or missed payments
A structured mortgage product may avoid an outright cash gift
Savings or the supporter’s home may be tied up or at risk
A written ownership arrangement can recognise unequal contributions
Joint ownership can affect tax, reliefs and future transactions
The support is affordable only if the family member can provide it without relying on money needed for their own home, care, emergencies or later life. Our household budgeting guide can help both sides test the effect on regular spending and savings before committing.
What hidden costs should families consider?
The contribution itself is not the only cost. Families may need to budget for independent legal advice, mortgage advice, valuation or product fees, ownership documents and possible tax consequences.
Also consider:
lost interest or investment growth on gifted or locked savings;
an early-repayment charge if the parent releases money from a mortgage;
interest and fees on later-life borrowing or equity release;
the effect of a joint purchase on property-tax surcharges and reliefs;
legal work for a declaration of trust, loan agreement or charge;
insurance or will changes; and
the cost of resolving a dispute where intentions were not documented.
Parents should be especially cautious about borrowing against their own home to help. Equity release, a second mortgage and retirement-interest-only borrowing have different risks and long-term costs. Regulated advice may be appropriate before using any of them.
What should families agree before money changes hands?
Agree the purpose, legal nature and worst-case outcome before transferring the money. The conversation should cover not only the planned purchase but also unemployment, relationship breakdown, sale, death and a change in either household’s finances.
Use this checklist:
Is the money a gift, loan, guarantee or investment?
Does the mortgage lender accept that structure?
Will the relative have any legal or beneficial ownership?
If it is a loan, when and how is it repaid?
What happens if the buyer separates from a partner or sells the home?
Can the supporter still afford retirement, care, housing and emergencies?
What evidence will the lender and conveyancer require?
Could property taxes, Inheritance Tax, benefits or care assessments be affected?
Do wills, insurance or powers of attorney need review?
Does each person need independent legal or financial advice?
Talking about money can feel uncomfortable, but ambiguity is more likely to damage the relationship later. Record the final decision rather than relying on different memories of a family conversation.
Are there alternatives to the Bank of Mum and Dad?
Alternatives can include saving for longer, choosing a lower-priced property, using a Lifetime ISA if eligible, exploring shared ownership or another recognised home-ownership scheme, or considering a mortgage designed for a smaller deposit. Eligibility, risks and availability change, so compare current options rather than assuming one route is open.
A mortgage adviser can explain lender criteria and family-assisted products. A solicitor or conveyancer can advise on the purchase and ownership structure. A tax adviser or regulated financial adviser may be needed where the contribution is large or affects pensions, investments, tax or retirement plans.
Avoid replacing a deposit shortfall with expensive short-term borrowing. Additional credit can increase monthly commitments and may reduce the amount a mortgage lender considers affordable. Our guide to how loan decisions are made explains the general role of income, commitments, credit information and affordability checks.
Frequently asked questions
Is the Bank of Mum and Dad an actual scheme?
No. It is an informal name for financial help from parents or relatives. Individual home builders, lenders or advisers may use the phrase in product names, but there is no single nationwide Bank of Mum and Dad scheme with one set of rules.
What is the average Bank of Mum and Dad gift?
There is no single official UK average. Published figures come from different lenders, surveys and years, and may combine gifts, loans and other family help. Use a study’s date and methodology before quoting it; the amount suitable for one family depends on its finances and the buyer’s mortgage plan.
Can a gifted deposit come from somebody who is not a parent?
Often yes, but the mortgage lender sets the policy. Gifts may be accepted from grandparents, siblings or other relatives, while some lenders restrict eligible donors or apply extra checks. Tell the lender and conveyancer who is giving the money before proceeding.
Does a parent who gives a deposit own part of the house?
Not automatically. A genuine outright gift normally gives the donor no ownership or repayment right. If the parent is intended to own a share or recover money later, the arrangement should be disclosed and documented as something other than an unconditional gift.
Can parents lend a mortgage deposit instead of gifting it?
Sometimes, but it depends on the mortgage lender. A family loan is a financial commitment and may affect affordability or be unacceptable under a lender’s criteria. Disclose the amount and repayment terms and obtain approval before relying on it.
Can parents ask for a gifted deposit back?
Not if it was genuinely given as an unconditional, non-repayable gift. A later request does not automatically convert it into a loan. Families that want a right to repayment should arrange and disclose a loan or protected interest from the start and obtain legal advice.
Does the seven-year rule apply to gifted deposits?
It can apply to an outright gift for Inheritance Tax purposes. If the donor survives seven years, the gift is normally outside their estate for IHT; if they die sooner, it may need to be considered with exemptions and other gifts. The seven-year rule is not a general rule for care fees, benefits or ownership disputes.
Sources and review information
This guide was newly researched and written for Money Trumpet and last reviewed on 13 September 2026. Principal sources were GOV.UK guidance on Inheritance Tax and gifts, higher Stamp Duty Land Tax rates for additional properties, joint property ownership and gifting under a power of attorney; HM Land Registry’s guide to owning property with somebody else; and MoneyHelper guidance on lending money to family and friends and the mortgage application process.
Money Trumpet is a credit broker, not a lender or mortgage adviser. This article provides general information, not personalised mortgage, financial, tax or legal advice. Mortgage criteria and property, tax, benefits and care rules depend on the transaction and UK nation. Obtain advice from appropriately qualified professionals before committing money or property.