What can I use for a mortgage deposit?

Securing a home often begins with one crucial question: “What can I use for a mortgage deposit?” As the foundation for your property purchase, understanding the intricacies of mortgage deposits is essential. Whether you’re eyeing your personal savings, considering selling assets or navigating the realms of gifts and inheritances, each deposit source comes with its own set of rules and implications.

This comprehensive guide delves into the myriad ways you can fund your mortgage deposit, helping you chart a clear path to your dream home. Dive in to unravel the nuances of each deposit type, ensuring you’re well-equipped to make informed decisions in your home-buying journey.

Where has your deposit come from?

It is a crucial question that your mortgage advisor will always ask when you’re considering buying a home. Not only is this question vital for understanding your financial situation, but it’s also essential for legal reasons. It’s not an attempt to pry into your personal affairs; instead, it’s a foundational aspect of preparing your mortgage application.

The reason behind this emphasis is twofold. Firstly, both solicitors and lenders have an obligation under anti-money laundering regulations to ensure that the sources of mortgage deposits are legitimate and not linked to any illicit activities. By understanding the origins of your deposit, they are fulfilling their duty and ensuring they comply with the law.

Secondly, knowing the source of your deposit helps lenders get a comprehensive picture of your financial health and behaviour. For example, a deposit saved over many years indicates financial discipline, while a gifted deposit may be viewed differently. All lenders have distinct criteria for what they consider acceptable in terms of deposit sources. Some might easily approve a gifted deposit, while others might scrutinise it more or not accept it at all.

Therefore, transparency about your deposit’s source is essential for your mortgage advisor. It allows them to align you with a lender that’s most likely to approve your application based on their deposit criteria. There’s no sense in pairing you with a lender that won’t accept your deposit source; it would simply waste your time and possibly affect your credit score if the application is declined. So, by sharing where your deposit came from, you’re streamlining the process and increasing your chances of mortgage approval.

Can I use my personal savings as a mortgage deposit?

Certainly, using your personal savings as a mortgage deposit is one of the most straightforward and common ways to secure a home loan. When you’ve accumulated a sum of money over time, whether through regular savings, interest accrual, or other means, this amount reflects positively on your financial discipline and stability.

Lenders view personal savings favourably because it shows that you’ve planned and saved for your property purchase, indicating responsibility and foresight. Moreover, it provides the lender with confidence about your ability to manage money and repay loans.

In most cases, you’ll need to provide statements from your bank or savings account to verify the amount and demonstrate its source. While using personal savings is generally well-received by lenders, it’s essential to ensure that you keep some savings aside for emergencies or unexpected costs. It’s always wise to have a financial cushion even after you’ve secured your home loan.

How can an inheritance be utilised for a mortgage deposit?

Utilising inheritance for a mortgage deposit is a common practice, especially when individuals receive a substantial amount after the passing of a family member or loved one. Here’s how you can leverage inheritance for this purpose:

When someone inherits money or assets, it’s often seen as a windfall. It might come unexpectedly or as a result of long-term planning, but regardless of the circumstances, an inheritance can significantly boost one’s financial position. For those looking to buy a property, using this inherited money as a mortgage deposit can be a practical decision.

To use inheritance as a mortgage deposit, first and foremost, the funds need to be accessible. If the money is tied up in trusts or has specific stipulations attached to it, it might not be immediately available. Once you’ve confirmed that you can access the funds, you should deposit them into a bank account.

Lenders typically require documentation to verify the source of your deposit, especially to comply with anti-money laundering regulations. When it comes to inheritance, the necessary paperwork might include a copy of the will, a letter from the executor of the estate, or even a death certificate. It’s essential to have these documents in order to prove to the lender that the money you’re using for the deposit is legitimately yours and has no strings attached.

Are gifted deposits from family or friends allowed when applying for a mortgage?

Yes, gifted deposits from family or friends are often allowed when applying for a mortgage. Many first-time homebuyers, especially, benefit from this type of financial help to get on the property ladder. Lenders generally accept gifted deposits, but they usually require certain conditions to be met to ensure transparency and legitimacy.

One of the primary concerns lenders have is ensuring that the gifted amount is genuinely a gift and not a loan. If it’s a loan, it would add to the borrower’s financial obligations and might impact their ability to repay the mortgage. Therefore, most lenders will request a written confirmation or a ‘gifted deposit letter’ from the person providing the gift. This letter typically states the nature of the relationship between the giver and the recipient, confirms that the money is a gift, and clarifies that it’s not expected to be repaid.

While gifted deposits can be a significant boost for potential homeowners, it’s essential for both parties to be aware of potential tax implications. Depending on the amount and the jurisdiction, there might be tax considerations related to large financial gifts.

Can I use the proceeds from selling my property?

Absolutely, the proceeds from selling your property can be used as a mortgage deposit for another property. In fact, many individuals who are looking to move homes, upgrade, downsize, or relocate often use the equity they’ve built up in their current property to fund the deposit for their next home.

When you sell a property, the difference between the sale price and any outstanding mortgage or other related selling expenses represents the equity or profit from the sale. This equity can be directly applied as a deposit on a new property. Using the proceeds from a property sale is viewed positively by lenders because it represents tangible assets and is a clear indication of your previous successful homeownership.

However, there are a few things to keep in mind. Firstly, the timing can be crucial, especially if you’re involved in a property chain. There might be a gap between the sale of your old property and the purchase of the new one. Some individuals opt for bridging loans to manage this gap, but it’s essential to ensure that the sale proceeds will cover the new deposit and any additional costs that might arise during the transition.

Additionally, it’s always a good idea to be transparent with your mortgage lender about your intentions and the source of your deposit. Providing them with all the necessary documentation related to the sale, such as the final statement of the sale or settlement statement, can help streamline the mortgage application process for your new property.

In essence, using the proceeds from the sale of a property is a common and practical method to fund a mortgage deposit for another property. It showcases a history of property ownership and financial responsibility, making it an attractive proposition for mortgage lenders.

Is it possible to use funds from selling personal assets towards my mortgage deposit?

Yes, it is possible to use funds from selling personal assets towards your mortgage deposit. Many people resort to liquidating assets, such as cars, jewellery, art, collectables, or other valuable items, to raise the necessary funds for a deposit on a home.

When you decide to use the proceeds from selling personal assets, it’s essential to keep detailed records of these transactions. This documentation becomes crucial when applying for a mortgage, as lenders will want to verify the source of your deposit to ensure its legitimacy. This verification process stems from lenders’ obligations under anti-money laundering regulations and their general practice of understanding an applicant’s financial health.

For significant assets, you might need to provide proof of ownership and the sale transaction. This could be in the form of receipts, valuations prior to the sale, sales agreements, or bank statements showing the deposit of the funds. For items like art or collectables, an authentication certificate or a valuation from an expert might be necessary.

Additionally, it’s essential to be aware that when selling assets, especially those that have appreciated in value, there could be tax implications. Depending on the jurisdiction and specific circumstances, capital gains tax or other taxes might apply. Therefore, consulting with a tax professional or financial advisor before selling valuable assets can be beneficial.

Can overseas deposits be used as part of my mortgage deposit in the UK?

Yes, overseas deposits can be used as part of your mortgage deposit in the UK. If you have savings or funds in a bank account outside the UK, you can transfer those funds to the UK to be used as a deposit for your mortgage.

However, there are several considerations to keep in mind. Lenders and solicitors in the UK have strict anti-money laundering regulations they must adhere to. This means they need to be sure of the legitimacy of any funds used for a mortgage deposit. When those funds come from overseas, this can sometimes introduce additional checks and requirements.

For instance, you’ll likely need to provide a clear paper trail that shows the origin of the funds. This might include bank statements or other financial documents from your overseas account. The documentation should ideally show a history of the money, demonstrating that it hasn’t just suddenly appeared, which could raise suspicions.

Furthermore, if you’re transferring funds from a country with financial restrictions or that’s known for money laundering or financial irregularities, be prepared for even more scrutiny. Lenders might be cautious about accepting deposits from certain countries or might require additional checks before they’re satisfied.

Currency fluctuations are another aspect to consider. The value of foreign currencies can change relative to the pound, which might affect the final amount you receive in your UK bank account after a transfer. It’s essential to factor in any conversion costs or potential changes in exchange rate, especially if there’s a delay between initiating the transfer and the funds arriving.

Are credit cards and personal loans acceptable sources for mortgage deposits?

Using credit cards and personal loans as sources for mortgage deposits in the UK is generally not recommended and often not acceptable to most lenders.

Lenders assess the risk of a borrower defaulting on their mortgage based on their financial health and behaviour. Borrowing money to fund the deposit can raise red flags for a lender as it increases the borrower’s overall debt level, indicating that they might not have the financial stability or discipline required to manage a mortgage.

Furthermore, taking out a loan or using a credit card can impact your credit score, which is another factor lenders consider during the mortgage application process. Any monthly repayments you need to make on these loans or credit card debts would also be factored into your affordability calculations, potentially reducing the amount you can borrow for the mortgage itself.

If you are considering using a personal loan or credit card to fund your deposit, it’s crucial to be transparent with your mortgage broker or lender about this from the outset. Some lenders might accept a loan as part of the deposit if you can prove you have the means to repay both the loan and the mortgage. However, this is more the exception than the rule.

It’s also worth noting that some government-backed schemes or specific mortgage products may have explicit rules against using borrowed money as part of the deposit.
In summary, while it might technically be possible to use credit cards or personal loans for a mortgage deposit, it’s generally not advisable and can complicate the mortgage application process.

What are the implications of using a deposit from a bridging loan for a mortgage?

Using a deposit from a bridging loan for a mortgage introduces several implications for the borrower.

A bridging loan is a short-term loan designed to ‘bridge’ the gap between the sale of one property and the purchase of another or to provide quick funding for an opportunity that requires swift action. They’re typically more expensive than standard mortgages in terms of interest rates and fees.

When using a bridging loan as a deposit for a mortgage:

Higher overall debt: You’re essentially taking out one loan to secure another. This increases your overall debt level and monthly obligations, which can strain your finances.

Affordability concerns: Mortgage lenders assess the affordability of borrowers. If you’re already repaying a bridging loan, this can reduce the amount the lender is willing to offer you for the mortgage because you have another significant financial obligation.

Potential for negative equity: If property values fall and you’ve financed your deposit with a bridging loan, you risk being in a position of negative equity. This means you owe more on the property than it’s worth, making it challenging to refinance or sell without incurring a loss.

Higher interest rates: Bridging loans often come with higher interest rates than standard mortgages. If you don’t repay the bridging loan quickly, it can become an expensive form of finance.

Exit strategy requirement: Bridging lenders usually require a clear exit strategy – a way you plan to repay the loan. If using it for a mortgage deposit, the exit might be the sale of another property or a long-term mortgage. If this exit strategy fails, you could face financial difficulties.

Risks of not selling: If you’re using a bridging loan in anticipation of selling another property, there’s the risk that the property might not sell quickly or for the anticipated price. This could leave you juggling both the bridging loan and the new mortgage.

Additional fees: Bridging loans can come with various fees, including arrangement fees, exit fees, and valuation fees. These can add to the overall cost of borrowing.

In essence, while a bridging loan can provide the funds needed for a mortgage deposit, especially in situations where timing is crucial, they come with added risks and costs. It’s vital to consider the implications and consult with financial professionals before opting for this route.

Can I use my gambling winnings as a mortgage deposit?

Yes, you can use gambling winnings as a mortgage deposit in the UK. However, there are some considerations to be aware of:

Lenders will want to verify the legitimacy of your deposit, regardless of its source. This means you’d need to provide evidence of the gambling win, such as a bank statement showing the deposit from the gambling company or if it’s a significant sum, proof from the establishment or platform where you won.

There’s also the issue of perception. Regular or substantial gambling activity on your bank statements, even if you’ve had some big wins, might raise concerns for the lender about your financial behaviour and stability. Lenders want assurance that borrowers are financially responsible and not likely to risk their home on future bets.

Furthermore, gambling winnings can be unpredictable and aren’t viewed in the same light as more stable forms of income or savings. A history of consistent savings demonstrates financial discipline, while sporadic large wins from gambling do not offer the same assurance.

It’s also important to keep in mind that while gambling winnings are not taxable in the UK, the origins of those winnings must be clear to satisfy anti-money laundering checks.

If you’re considering using gambling winnings as a mortgage deposit, it’s a good idea to discuss your situation with a mortgage broker or advisor. They can offer guidance tailored to your circumstances and help you navigate the application process with the right lender.

Can I use retirement funds or pensions for my mortgage deposit?

Yes, it is possible to use retirement funds or pensions for your mortgage deposit, but there are considerations and implications to be aware of. In the UK, once you reach the age of 55, you’re given more flexibility in how you access your defined contribution pension pot, thanks to pension freedoms introduced in 2015.

When you access your pension pot, the first 25% withdrawn is typically tax-free, while the remaining 75% is taxable as income. So, if you’re thinking about using your pension to help fund a mortgage deposit, it’s important to factor in the tax implications.

However, regularly withdrawing significant amounts from your pension pot before you retire could affect the size of your pension income in retirement. It’s crucial to understand the potential long-term implications of reducing your retirement savings.

Another thing to consider is how lenders view pension withdrawals. Some lenders may have reservations about applicants using their pension as a deposit, especially if it appears the applicant is depleting their retirement savings or potentially affecting their future financial stability.

It’s also worth noting that if you have a defined benefit or final salary pension, accessing it early for a property purchase could be more complicated and might require transferring it to a defined contribution scheme first. This move can be risky and may not offer the same level of benefits.

Are there any restrictions on the type of assets I can sell to raise a deposit for a mortgage?

In the UK, there aren’t typically specific restrictions on the type of assets you can sell to raise a deposit for a mortgage. However, there are some general considerations to keep in mind:

Proof of ownership and sale: Lenders will want evidence that you legitimately owned the asset and have sold it. Documentation could include receipts, ownership certificates, sales agreements, or bank statements showing the deposit of the funds from the sale.

Anti-money laundering checks: To comply with anti-money laundering regulations, lenders will want to ensure the funds used for a deposit haven’t come from illegal activities. A clear paper trail of the asset sale can help demonstrate the legitimacy of the funds.

Stability of funds: Assets like stocks, shares, or bonds are straightforward to liquidate and are usually straightforward for lenders to understand. However, selling more obscure or unconventional assets might raise questions, requiring additional documentation or explanation.

Tax implications: Depending on the asset, selling it might have tax implications, such as capital gains tax. It’s essential to account for any tax liabilities when determining the net proceeds available for your deposit.

Speed of sale: Some assets, like property or rare collectables, might take longer to sell than more liquid assets like stocks or bonds. The timeframe might be a consideration if you’re aiming to secure a mortgage by a particular date.

Value fluctuations: Assets like stocks or cryptocurrency can be volatile, with values fluctuating. This unpredictability might impact the amount you can raise from the sale.

While you have the freedom to sell various assets to raise a mortgage deposit, it’s crucial to ensure a clear and legitimate transaction history. Consulting with a mortgage advisor can provide clarity on what lenders might want to see in terms of documentation and proof of sale.

What kind of documentation do I need to show the source of my deposit when applying for a mortgage?

When applying for a mortgage in the UK, lenders require proof of the source of your deposit to ensure the money is legitimate and not tied to any illegal activities, in line with anti-money laundering regulations. The specific documentation you’ll need can vary depending on the source of your deposit. Here are some common deposit sources and the typical documentation lenders might ask for:

Personal savings:

  • Bank statements (usually for the last three to six months) showing a build-up of funds.
  • Passbook from a savings account, if applicable.

Gifted deposit:

  • A gifted deposit letter from the person gifting the money, stating the amount, their relationship to you, and confirming it’s a gift and not a loan.
  • Bank statements from the donor might sometimes be requested to prove the source of their funds.


  • A letter from the executor of the will or a solicitor confirming the amount you have inherited.
  • A copy of the will or the grant of probate, if applicable.
  • Bank statements showing the received funds.

Sale of property:

  • Completion statement from the solicitor to confirm the sale.
  • Bank statements showing the proceeds from the sale being deposited.

Sale of personal assets:

  • Receipts or proof of sale (e.g., from auction houses or buyer receipts).
  • For valuable items, previous valuations or authenticity certificates might be required.

Overseas deposits:

  • Foreign bank statements showing the source of funds.
  • Proof of funds transfer to a UK bank account.
  • Additional documentation may be required depending on the country of origin due to money laundering concerns.

Loans or credit: Lenders typically don’t accept personal loans or credit card borrowings as a source for deposits, but if they do, they’d need a statement or agreement detailing the loan.

Gambling winnings: Proof of the win, which could be a bank statement showing the deposit from the gambling company or a receipt from the establishment where the win occurred.

Bridging loans: Loan agreement or statement detailing the terms of the bridging loan.

Financial investments: Statements or certificates for bonds, shares, or other financial investments you’ve cashed in.

Always ensure the documents are up to date and provide a clear trail of the funds. Since each lender may have slightly different requirements, it’s also a good idea to check with them directly or work with a mortgage advisor to ensure you provide all the necessary documentation.

What are common mistakes people make when saving for a mortgage deposit?

When saving for a mortgage deposit, there are several common mistakes people often make. Being aware of these can help prospective homeowners avoid potential setbacks and better position themselves for a successful mortgage application:

Underestimating costs: Some people focus solely on the deposit amount and forget about other associated costs like stamp duty, valuation fees, solicitor fees, and survey costs. These additional expenses can be substantial and should be factored into your savings goal.

Not researching loan-to-value (LTV) ratios: The deposit you save determines your LTV ratio, which in turn can influence your mortgage interest rate. A higher deposit generally means a lower LTV and can lead to better mortgage deals. Not understanding this can mean missing out on preferable rates.

Neglecting credit score: While saving for a deposit, some people overlook the importance of maintaining a good credit score. Your credit rating will be a key factor when lenders assess your mortgage application, so it’s vital to consistently check and work on improving your score.

Impulsive large purchases: Big purchases, especially on credit, can affect your debt-to-income ratio and your credit score. Both of these can impact your mortgage application’s success and the terms you’re offered.

Inconsistent saving: Irregular or sporadic saving can prolong the process of accumulating a sufficient deposit. Setting up a regular monthly direct deposit into a savings account can help maintain discipline.

Not using government schemes: In the UK, there are several schemes like the Help to Buy ISA or the Lifetime ISA designed to assist first-time buyers in saving for a deposit. Not taking advantage of these can mean missing out on bonus payments or other incentives.

Dipping into savings: Once you start saving, it’s essential to avoid the temptation to dip into these funds for non-essential purchases or expenses.

Not considering gifted deposits: Some first-time buyers don’t realise they can use gifts from family as part of their deposit. While there are rules and documentation required, it’s an option that can make homeownership achievable sooner.

Failing to shop around for savings accounts: Not all savings accounts offer the same interest rates. Failing to shop around can mean losing out on potential interest which can compound over time.

Not reviewing the market: Housing prices and mortgage deals change. Regularly reviewing the property market can give you a better idea of how much you need to save.

Overlooking joint mortgages: Some first-time buyers don’t consider the option of a joint mortgage with friends or family, which can make buying a property more affordable.

Not seeking professional advice: A mortgage advisor can provide valuable insights into how much you need to save, the best mortgage products for your situation, and strategies to improve your chances of approval.

By being aware of these pitfalls and adopting a disciplined, informed approach, individuals can more effectively save for their mortgage deposit and navigate the home buying process.

How do mortgage brokers advise on deposit sizes and sources?

Mortgage brokers play an essential role in guiding prospective homeowners through the complexities of securing a mortgage, and a crucial part of that is advising on deposit sizes and sources.

When it comes to deposit sizes, the size often dictates the terms of the mortgage, including the interest rate. Generally, a larger deposit results in a lower Loan-to-Value (LTV) ratio, which can lead to more favourable mortgage terms and rates. Mortgage brokers will assess a client’s financial situation and provide advice on the optimal deposit size that would not only meet lenders’ requirements but also secure favourable mortgage terms. They often highlight the balance between saving more for a deposit and taking advantage of current market conditions.

The source of the deposit is equally important. Mortgage brokers emphasise the significance of demonstrating a legitimate source for the deposit due to strict anti-money laundering regulations. They’ll advise clients to ensure they have the necessary documentation to prove the origin of their funds, whether it’s from personal savings, inheritance, the sale of assets, or gifts.

Gifted deposits, often from family members, are a common source, and brokers guide clients on the requirements surrounding these. It’s generally necessary to provide a letter confirming the money is a gift and not a loan, and some lenders might want evidence of the donor’s financial position. Mortgage brokers can offer direction on the best way to document this.

Furthermore, they’ll caution against certain sources of funds that may be frowned upon or not accepted by lenders at all. For instance, many lenders are wary of deposits sourced from personal loans or credit cards, as these increase the borrower’s overall debt levels.

Mortgage brokers also advise clients on various government schemes designed to help first-time buyers, ensuring clients maximise any available benefits.

In essence, a mortgage broker’s role is to provide a holistic view of the mortgage application process. They combine their knowledge of the market, the requirements of various lenders, and the financial standing of their clients to provide tailored advice on deposit sizes and sources, ensuring the best chance of mortgage approval.


Can I split my mortgage deposit between cash and assets?

Yes, you can potentially split your mortgage deposit between cash and assets, but it largely depends on the lender’s policies and the nature of the assets in question. For instance, if you’re selling personal assets like a car, antiques, or shares to raise funds for a deposit, you would first convert these assets into cash, and the proceeds would then form part of your cash deposit. If you’re considering using an asset as direct collateral (instead of converting it to cash), it’s less common and might be limited to specific types of assets or lending situations. Always consult with a mortgage broker or lender to understand the specific requirements and acceptability of different assets.

What precautions should I take if using a credit card or personal loan for my mortgage deposit?

Using a credit card or personal loan for your mortgage deposit is not generally advised and can be viewed unfavourably by lenders. If you’re considering this option:
Lender approval: Check with potential lenders first. Many lenders won’t accept a mortgage deposit sourced from borrowed funds as it increases your debt-to-income ratio.
Affordability: Consider whether you can afford both the mortgage repayments and repayments on the credit card or personal loan. Taking on too much debt can strain your finances.
Interest rates: Credit cards typically have high interest rates. If you don’t pay off the balance in full quickly, the interest can accumulate rapidly, making the borrowed amount much more expensive in the long run.
Transparency: Be honest with your lender. Trying to conceal the source of your deposit can have serious implications, including loan denial or future legal issues.

What’s the difference between a gifted deposit and an inheritance when used for a mortgage?

A gifted deposit refers to money given to a homebuyer, usually by a family member or close friend, specifically for the purpose of contributing to a property purchase. The giver typically provides a letter stating that the money is a gift and not a loan, meaning there’s no expectation for the money to be repaid.
Inheritance, on the other hand, is money or assets received following the death of a relative or friend. It’s a distribution from the estate of the deceased. Depending on the size and complexity of the estate, receiving an inheritance can sometimes take longer than receiving a gifted deposit.
Both gifted deposits and inheritances can be used towards a mortgage deposit. Lenders will usually require documentation for both, such as a gift letter for a gifted deposit or probate documentation for an inheritance.

Can assets such as cars, jewellery, or artwork be sold to contribute to a mortgage deposit in the UK?

Yes, tangible assets like cars, jewellery, or artwork can be sold to raise funds for a mortgage deposit in the UK. The proceeds from the sale can be used as part of, or in some cases, the entirety of the deposit. Lenders will often ask for proof of sale and ownership to ensure the funds have been legitimately acquired.

How can first-time buyers raise a mortgage deposit quickly?

Budgeting and savings: Create a strict budget to maximise savings. Cut non-essential expenses and consider automatic transfers into a savings account.
Government schemes: Utilise government schemes designed for first-time buyers, such as the Help to Buy ISA or the Lifetime ISA, which offer bonus payments.
Sell Unwanted Assets: As mentioned, selling items like cars, jewellery, or collectables can provide a cash boost.
Gifted deposits: Family members might be willing to gift money towards a deposit.
Second Job or Side Hustle: Taking on additional work or starting a side business can provide extra income.
Downsize: If renting, consider moving to a cheaper property or area to save on rent.
Shared Ownership Schemes: These allow you to buy a share of a property and rent the remaining share, often requiring a smaller deposit.

What’s the difference between a mortgage deposit and a down payment?

In essence, a mortgage deposit and a down payment refer to the same thing: the initial lump sum paid upfront when purchasing a property. However, the terminology varies based on region. In the UK, it’s commonly referred to as a “mortgage deposit,” while in the US and some other countries, it’s known as a “down payment.” Both represent the percentage of the property’s total purchase price that the buyer pays upfront, with the remainder typically being financed through a mortgage loan.

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