Helping your child buy a home in England & Wales starts with one decision: gift or loan. A gift usually maximises their mortgage; a documented loan keeps the money recoverable — and protects it if the couple later separates — but must be declared to the lender. This guide covers what the conveyancer will ask and how to keep it fair for the whole family.
The decision that comes before the money
Every parental deposit contribution is one of two things, and the honest choice between them decides all the paperwork downstream. A gift means you genuinely expect nothing back — not repayment, not a stake in the property, not a quiet understanding. A loan means the money returns, on whatever gentle schedule suits everyone. Neither answer is wrong — genuinely unsure which fits? The gift-or-loan decision tool walks it through in two minutes. The only wrong move is leaving the question unanswered, or — worse — answering it differently to different people.
What the conveyancer and mortgage lender will ask
Source-of-funds checks are not optional, and they arrive early. Choose the gift route and the mortgage lender will want a gifted-deposit letter: a signed confirmation that repayment is not expected and that you claim no interest in the property. Choose the loan route and you declare it as exactly that — most lenders will simply add the agreed repayment into their affordability sums and carry on.
The route that ends careers in family finance is the third one: privately expecting repayment while signing a letter that says gift. That letter becomes part of a regulated mortgage application. Misstating it isn’t a white lie between relatives; it’s a false statement to a lender.
The couple question nobody enjoys raising
If your child is buying with a partner, the gift-or-loan choice quietly becomes a question about someone else’s future too. Should the couple later separate, a documented parental loan is a debt against the property’s equity — money that comes back before anything is divided. An undocumented contribution tends to dissolve into the couple’s joint position, and reconstructing it years later, mid-separation, is as grim as it sounds. This single scenario converts more parents from “we’ll sort it out later” to “let’s write it down” than any other.
What the cohabitation cases teach
The leading English cases on who owns what in a shared home — Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53 — tell courts to infer the parties’ intentions from the whole course of dealing: who paid what, when, and on what understanding. When parental deposit money enters that picture undocumented, it becomes one more disputed artefact in someone else’s ownership archaeology. A signed loan agreement takes it out of the dig entirely: the money is a recorded debt, not evidence to be argued over. Ten minutes of paperwork against years of Stack-style inference is not a close call.
The tax side is friendlier than most parents fear: the UK has no gift tax, a gifted deposit is a potentially exempt transfer that leaves your estate if you survive seven years, and a loan simply remains your asset — the HMRC short version covers both routes.
Fairness across the family
Deposits are rarely lent into families of one. Whatever you do for the first child buying sets the reference point for the others — and memory is a poor ledger across a decade. A written loan preserves optionality: it can be repaid, partly forgiven on a wedding, or offset against an inheritance, all cleanly, because the starting number exists on paper. A vague contribution can only ever be argued about.
If it’s a loan, make it a boring one
The best family deposit loans are administratively dull: a bank transfer carrying a payment reference, repayments starting after completion at a figure the new mortgage genuinely leaves room for, and a signed agreement both sides keep. Interest is optional and usually omitted. Four minutes of drafting with a deposit-specific agreement, one signature ceremony over the phones, and the subject need never come up at dinner again — which, for most families, was the entire object.