Written by John Noakes, Mortgage and Protection Advisor, The Mortgage Broker.
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Who this guide is for and what it covers
- If you are a first time buyer wondering where your deposit can come from
- If family help is involved and you want to avoid delays or declined applications
- If you are using savings, a Lifetime ISA (LISA), or a gifted deposit
- Clear next steps so you can move forward with confidence
Why lenders care where your deposit comes from
This is about:
- Affordability and sustainability
- Anti-money laundering checks
- Making sure there are no hidden loans or repayment expectations
Lenders are not only interested in how much deposit you have. They also need to understand where the money came from and whether it needs to be paid back.
This is partly about affordability and partly about regulation. Mortgage lenders must carry out checks to confirm that your deposit is genuine, traceable and not disguising additional borrowing.
It is also important to understand that your solicitor or conveyancer will carry out their own independent source-of-funds checks. Even where a lender does not request detailed deposit evidence, solicitors are required to complete full due diligence under anti-money laundering regulations.
This means a mortgage offer can be issued, but the purchase could still be delayed or fail later if the deposit source cannot be fully evidenced to the solicitor’s satisfaction.
The good news is that most deposit types are acceptable when they are structured correctly from the start.
1. Saved deposits
The simplest option for most first time buyers
A saved deposit is money that already belongs to you and has been built up over time. From a lender’s point of view, this is usually the most straightforward deposit type because ownership is clear and repayment is not expected.
Savings often come from income, bonuses, inheritance already received, or money held in a savings account or cash ISA. Lenders will usually ask for recent bank statements so they can follow the trail of funds.
1.1 What usually counts as a saved deposit
- Most lenders are comfortable with savings built up gradually, such as:
- Regular savings from income
- Money held in a savings account or cash ISA
- Bonuses or tax refunds paid into your account
- Inheritance already received
What matters is clarity, not how impressive the saving journey looks.
1.2 What lenders normally check
Even with saved deposits, lenders still carry out checks. They are usually confirming where the money came from, how long it has been held, and that it is not borrowed.
You may be asked for bank statements covering the last 3 to 6 months, although this varies by lender.
Solicitors will usually require similar evidence as part of their legal checks, even where lenders are satisfied.
1.3 When saved deposits raise questions
Questions tend to arise when there are large recent transfers, cash deposits with no explanation, or money moved between multiple accounts without a clear trail.
These situations are common and usually fixable. They just need to be explained early so the lender is comfortable.
Get started2. Gifted deposits
2.1 Family help that lenders commonly accept
A gifted deposit is money given to you, usually by parents or grandparents, to help you buy your first home. This is extremely common and accepted by many lenders when structured correctly.
The key point is that the money must be a true gift, not a loan.
2.2 How lenders view gifted deposits
From a lender’s perspective, gifted deposits are acceptable where there is no expectation of repayment and no legal interest in the property.
Most lenders will ask for a gifted deposit letter and basic checks on the person giving the gift. This is standard and part of regulatory requirements, not a sign of concern. Your solicitor will also need to carry out their own checks on the gift and the person providing it before exchange of contracts.
2.3 What can cause issues
Problems arise when gifted money is described informally as “help” or when repayment expectations are unclear.
If money needs to be paid back, even informally, it must be declared. Undeclared family loans can affect affordability and delay or stop an application.
2.4 Why wording and timing matter
Different lenders have different requirements around gifted deposits. Getting the wording right from the start avoids last-minute requests just before exchange.
This is where broker guidance makes a real difference.
Two buyers with the same deposit amount can have very different outcomes, depending on how that deposit is structured.
3. Lifetime ISA (LISA)
3.1 How a LISA works for first time buyers
A Lifetime ISA is designed to help first time buyers save for a deposit. You can save up to £4,000 per tax year and receive a 25% government bonus.
When used correctly, LISA funds are widely accepted by mortgage lenders.
3.2 What lenders usually check with LISAs
Lenders will look at whether the account has been open for at least 12 months and whether the funds are being released correctly through your conveyancer.
They also check that the purchase meets the scheme rules so penalties are avoided.
3.3 Common timing pitfalls
Issues tend to arise where a LISA has not been open long enough or where buyers expect the funds to be released instantly.
This does not always stop a purchase, but it can affect how much deposit is available and when
Using more than one deposit source
Many first time buyers use a mix of deposit sources, such as savings alongside a gifted deposit or a LISA topped up with family help.
Lenders usually assess each part separately. As long as each source is acceptable and clearly evidenced, combining deposits is rarely a problem.
Costs, risks and things to watch out for
Most deposit-related delays are administrative rather than financial.
Common causes include unclear gifted deposit wording, late money transfers, or paperwork that does not clearly show where funds came from. These issues are avoidable with early checks and clear explanations.
A simple worked example
You are a first time buyer using your own savings, a Lifetime ISA, and a gifted deposit from parents.
Your adviser checks that the gifted deposit letter meets lender requirements, the LISA funds can be released in time, and your bank statements clearly show how your savings were built up. The lender is satisfied and assesses the application based on affordability and credit history.
This is a very typical scenario.
There is no single ‘right’ way to build a deposit. Most first time buyers use a mix of savings, family help and schemes like the LISA. The key is getting it checked early.
Frequently asked questions : Deposit options – Gifted vs Saved vs LISA
Yes. Most lenders accept parental gifted deposits, provided the money does not need to be repaid and the correct declaration is in place.
Yes. Many first time buyers use a combination of deposit sources, as long as each part meets lender criteria.
There is no fixed rule, but lenders commonly review the last 3 to 6 months of bank statements to understand the source of funds.
Most lenders do not accept loans as deposits. If money must be repaid, it needs to be declared and may affect affordability.
The source itself usually does not, but your income, commitments and credit file still apply.
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Author: John Noakes, Mortgage Advisor
Your home may be repossessed if you do not keep up repayments on your mortgage.
Information only. This does not constitute regulated mortgage advice.
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