Releasing equity to help a child or other family member buy their own home, often as a gifted deposit, is one of the more common reasons people raise money against their property, and adverse credit does not usually rule it out. What changes is what a lender asks for: evidence the money really is a gift, and reassurance that the new borrowing is affordable for you, since you remain responsible for repaying it whether or not the gift ever needs to be paid back.
This page covers giving money to help family buy a home. For raising money more generally, including how the amount is worked out, see releasing equity with bad credit.
On this page
This page covers
- Reason for remortgaging
- Raising moneyBorrowing more increases your loan to value, which can change the options available.
Read the main guide: Remortgaging to release equity when you have bad credit
In short
- The family member’s lender will usually want written confirmation the money is a gift, not a loan to be repaid.
- You remain responsible for repaying the borrowing on your own home, regardless of the gift.
- Large gifts can have inheritance tax implications, so check the current rules on GOV.UK.
- Being a guarantor or joint borrower is a different route from a straight cash gift, with its own risks.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
What does the family member’s lender want to see?
Mortgage lenders assessing your family member’s purchase usually ask for a gift letter, confirming the money is a genuine gift, that you have no interest in the property, and that you do not expect it to be repaid. This protects the lender’s security and is a standard part of using gifted deposits, regardless of how the giver raised the money.
Some lenders may also want confirmation of where the funds came from, sometimes called a source of funds check, particularly for anti-money-laundering purposes. A solicitor handling either transaction can usually guide you through what is needed.
Does this affect your own mortgage application differently?
Raising the money is still, for your own lender, a standard raise-capital application: your loan to value, affordability and credit history are assessed in the usual way. What can differ is the purpose question. Some lenders ask specifically what the money is for, and lending to another person, even a close family member, is sometimes viewed slightly more cautiously than spending the money on your own property.
| Purpose | What a lender typically focuses on |
|---|---|
| Home improvements | Whether the work and cost look reasonable for the property |
| Debt consolidation | The wider affordability and risk of securing unsecured debt on your home |
| Gift to family for a deposit | That the money is genuinely a gift, and your own affordability once it is given |
Illustrative only. This is not the criteria of any specific lender.
What should you check before giving a large gift?
A gift is not repaid to you, so the borrowing stays on your own mortgage for the full term, and you need to be comfortable affording it regardless of your family member’s circumstances. Large gifts can also have inheritance tax implications if the giver dies within a certain period, so it is worth checking GOV.UK’s guidance on gifts and inheritance tax before deciding on the amount.
If you are helping an elderly relative who receives means-tested benefits, giving away savings or equity can sometimes affect their own entitlement. This is a separate question from your own mortgage and is worth checking with MoneyHelper or an independent adviser if it applies.
Are there alternatives to a straight cash gift?
Rather than gifting cash, some people become a guarantor or joint borrower on their family member’s mortgage instead. This does not involve releasing equity from your own home in the same way, but it makes you responsible for their mortgage payments if they cannot pay, which is a different and ongoing risk from a one-off gift.
- A cash gift through releasing equity, covered on this page, adds to your own mortgage but is a one-off commitment.
- Being a guarantor does not add to your borrowing directly, but makes you liable if your family member misses payments.
- A joint mortgage puts both names on the new property, which affects your own borrowing capacity elsewhere.
- Family offset or family deposit mortgages, offered by some lenders, use savings rather than home equity, so may suit those who cannot or do not want to remortgage.
Getting advice
A specialist adviser can help with the raise-capital side for your own mortgage, while your family member’s adviser or solicitor can confirm exactly what gift letter and evidence their own lender needs. Doing both in parallel usually keeps the timing of the two transactions aligned.
What may affect releasing equity to help family buy
| Factor | Why it matters |
|---|---|
| Amount you want to raise | A larger gift increases both your borrowing and your loan to value. |
| Maximum LTV for raise-capital with your credit profile | Some lenders set this lower for adverse credit than for a like-for-like remortgage. |
| What the money is for | Some lenders ask specifically about gifting money to another person. |
| Your own affordability after the gift | You remain responsible for the extra borrowing, whether or not it is ever repaid to you. |
| The gift letter | Your family member’s lender will usually need written confirmation the money is a gift, not a loan. |
| Source of funds evidence | Some lenders ask for confirmation of where the money came from, for anti-money-laundering purposes. |
| Inheritance tax rules | Large gifts can be affected by inheritance tax if the giver dies within a certain period. Check GOV.UK. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- How much you want to raise and confirmation it is a gift, not a loan
- Your current mortgage balance, deal end date and any early repayment charges
- An estimate of your property’s current value
- Your credit reports from Experian, Equifax and TransUnion
- Proof of income and your main monthly outgoings
- Your family member’s solicitor or adviser details, to coordinate timing
Frequently asked questions
Do I need to write a formal gift letter?
Your family member’s lender will usually require one, confirming the money is a gift, that you have no interest in the property, and that you do not expect it to be repaid. Their solicitor can provide the wording their lender needs.
Will giving a large gift affect my inheritance tax position?
It can. Gifts can be affected by inheritance tax rules if the giver dies within a certain period afterwards. Check GOV.UK’s guidance on gifts or speak to an independent adviser for your specific situation.
What if I want the money back eventually?
If you expect repayment, it is a loan rather than a gift, and most residential lenders will not accept a loan from a family member as part of the deposit in the same way as a gift. Ask their adviser what their lender allows.
Is being a guarantor a better option than gifting cash?
It depends on your circumstances. A guarantor arrangement avoids releasing equity from your own home directly, but makes you liable for their payments if they fall behind, which is an ongoing risk rather than a one-off commitment.