29 May 2026 · 6 min read
The Bank of Mum and Dad
Family help with a deposit is now one of the most common ways people get on the ladder. But money from parents raises questions a normal purchase does not: is it a gift or a loan? Do the parents want it back, or a share of the property? And if the money goes to one half of a couple, how do you make sure it stays theirs? A declaration of trust is often the cleanest way to answer all three.
Gift or loan? Decide first
Be clear from the outset which this is, because they are treated very differently:
- A gift is given with no expectation of repayment. Most mortgage lenders require a signed "gifted deposit letter" from the parents confirming exactly that, and usually that they will have no stake in the property.
- A loan is repayable. Lenders treat this as a commitment that affects affordability, so it must be declared. It should be documented in writing.
The lender point you must not miss
This trips people up: most residential lenders require the deposit to be a genuine gift with no strings. So if the parents want a share of the property or their money formally protected, that can conflict with the lender's requirements. Always check what your lender will accept before you set anything up - a solicitor can help you structure it in a way that keeps the lender happy.
Where a declaration of trust comes in
Once the lender position is clear, a declaration of trust can record what was agreed, for example:
- Protecting whose money it is. If parents gift to their own child within a couple, a declaration of trust can credit that deposit to that person, so it is not simply treated as shared. See unequal deposits and a joint mortgage.
- Returning the parents' money on sale. Where the lender allows it, the document can say the parents' contribution is repaid first when the property is sold.
- Recording a genuine ownership share for the parents, if that is the arrangement and the lender agrees.
A word on tax
Gifts from parents can have inheritance tax implications depending on the amount and how long the parent lives after making the gift. The rules are beyond the scope of this guide and depend on individual circumstances, so speak to a tax adviser or solicitor before large sums change hands. A declaration of trust records ownership; it is not a substitute for tax advice.
The bottom line
If the Bank of Mum and Dad is helping, decide gift or loan, check what your lender will accept, and use a declaration of trust to record who the money belongs to and what happens to it on a sale. It protects the family money and keeps everyone clear, which is exactly what you want when relationships and large sums are involved.
This article is general information about the law in England and Wales, not legal or tax advice. For your own situation, speak to a qualified solicitor or tax adviser.
TrustBadger keeps a timestamped, solicitor-ready record of every contribution you and your co-owner make to your shared home. 14-day free trial, no card needed. Start your trial.
