Borrowing from Parents for a House Deposit: How It Works, Pros, Cons and Alternatives

There are loads of ways your parents can help fund your first home. A gifted deposit is most common, while other options include family loans, guarantor mortgages and joint borrower sole proprietor mortgages. Chats with your parents about help should be open and practical. If they can’t help, Freedom to Buy, First Homes or Shared Ownership are good alternatives.

What is the Bank of Mum and Dad?

The ‘Bank of Mum and Dad’ is a term used to describe financial support from parents to help their children buy a home.

Despite the name, it doesn't have to be your parents. Grandparents or other relatives may also be able to help.

There are loads of ways your family can provide support. The money might be given as a gift, it can be lent to you, or a family member could help you qualify for a mortgage by acting as a mortgage guarantor.

Many people find it hard to ask for this kind of help. That's totally normal. We'll walk you through how to have that conversation later in this guide.

Different types of financial support from the Bank of Mum and Dad

There are four main ways your family could help you buy a home.

1. Gifted deposits

A gifted deposit is money you don't need to pay back. It's the most common type of help from the Bank of Mum and Dad. It's popular because it's simple. The money is yours and there's no loan hanging over you.

There is some paperwork, though. Your lender will ask for a gifted deposit letter. This is a signed letter from whoever gave you the money. It confirms the money is a gift, not a loan. It also confirms they have no claim on the property you’re buying. This protects you, your lender and your family member.

2. Loans for a deposit

Your parents could lend you the money rather than giving it to you.

However, a family loan for a mortgage can affect your mortgage application. The lender may count these repayments when checking affordability. This could reduce how much you can borrow.

If your parents lend you the money, agree how and when you’ll repay it before you go ahead.

3. Mortgage guarantors

A parent or another family member may be able to act as a mortgage guarantor.

This means that they agree to cover the mortgage if you can’t keep up the repayments. This can help if your income alone isn’t enough to get a mortgage. But it also means the guarantor takes on a financial risk.

You’ll need a specific type of mortgage for this.

4. Joint borrower sole proprietor (JBSP) mortgage

With a joint borrower sole proprietor (JBSP) mortgage, a parent joins your mortgage application. Their income can then be included when the lender checks what you can afford to borrow.

The parent is not an owner of the home. Only you are named on the deeds. This can help if you have enough savings for a deposit but your income is not high enough to borrow what you need.

You’ll need a specialist JBSP mortgage. It's a big ask of a parent, so it's worth everyone being clear on what they're signing up for – together.

Why is deposit size important for a first time buyer?

For a first time buyer, the size of your deposit affects your loan-to-value (LTV). This is the percentage of the property's value you borrow as a mortgage. The bigger your deposit, the lower your LTV.

For example, if you’re buying a home worth £200,000:

• £20,000 deposit ➜ £180,000 mortgage and 90% LTV.

• £40,000 deposit ➜ £160,000 mortgage and 80% LTV.

A lower LTV can give you access to more mortgage deals and lower interest rates. You also borrow less, which can reduce how much you pay every month and the amount of interest you pay overall.

In short: the more you can put down, the more doors open. It doesn't matter if that money comes from your own savings or a gift from family, or a combination of both.

What are the advantages of using the Bank of Mum and Dad?

There are some clear benefits if your family is in a position to help:

• You will have a lower LTV: Combining your own savings with a contribution from your parents can give you a bigger deposit. This means you need to borrow less compared with the property's value, giving you a lower LTV.

• You could get a better mortgage rate: Lower-LTV mortgages often have more competitive interest rates. This could reduce your monthly repayments and the total interest you pay.

• You may have more choice: A bigger deposit can give you access to a wider range of mortgage deals and potentially more properties within your budget.

It's important to remember that a larger deposit doesn't automatically mean you can afford a more expensive home. You still need to make sure the monthly repayments and other household costs fit comfortably within your budget.

Use our Affordability Calculator to see how much you can afford to borrow.

What are the disadvantages of using the Bank of Mum and Dad?

Family help can make a real difference, but it's not for everyone, and that's OK too.

Here's what to think about first:

• How this could affect your relationship. Talking about money with your parents can be tricky. If you have siblings, there may be hard conversations about fairness.

• Stricter lending rules. If your parents lend you the money (rather than giving it to you), the mortgage lender may include your repayments when checking affordability.

• Additional debt. A loan from your parents is still a financial commitment. If you have to repay it alongside your mortgage, you'll have higher monthly outgoings.

• Different levels of family support. If you’re buying with a partner and only one set of parents can help, this can create an imbalance. Agree how you’ll treat the different contributions before you buy and consider legal advice about how this could affect ownership.

None of this means you should rule out family help. It just means it's worth talking through openly first.

What are the hidden costs of borrowing from the Bank of Mum and Dad?

It's easy to focus on what the money means for you. But think about what it means for your family too. A large gift could affect your parents’ own finances.

Before any money changes hands, make sure everyone understands:

• What the money is for

• If it's a loan, how and when it will be paid back

• Any inheritance tax that might apply if your parent passes away

That last point catches people out more than you'd think. Speak to a solicitor about your own situation rather than guessing.

How do guarantor mortgages work?

A guarantor mortgage is a specific type of mortgage where a parent or another guarantor supports the loan, often through their income. If you're ever unable to keep up repayments, your guarantor steps in to cover them. It’s a big commitment for them to make

A guarantor mortgage works differently to a gifted deposit. With a gift, your parents hand over money upfront, and that money becomes part of your deposit. Once it's given, it's yours, and they have no further involvement.

With a guarantor mortgage, no money changes hands at all. Instead, your parent agrees to cover your mortgage payments if you're ever unable to. Lenders usually ask them to offer their own savings or their home as security.

This means your parent takes on an ongoing commitment, not a one-off gift. They will stay financially linked to your mortgage until the lender agrees the guarantor can be removed.

It can be a good option if your parents don't have spare cash to give but do have savings or home equity (the money tied up in their own home) they're willing to back you with instead.

What are the alternatives to using the Bank of Mum and Dad?

Homebuying schemes

Homebuying schemes are designed to help first-time buyers get on the property ladder. A mortgage broker can advise you about which schemes can help you buy your first home.

This table shows some of the homebuying schemes currently available.

A Lifetime ISA can boost your deposit

If you're aged 18 to 39, a Lifetime ISA (LISA) can give your house deposit a useful boost. You can save up to £4,000 a year, and the government adds a 25% bonus. So saving the full £4,000 in a year, will give you an extra £1,000 towards your first home. You can keep adding to a LISA until you're 50.

Read more about Lifetime ISAs

How to ask the Bank of Mum and Dad for money

Wondering how to ask your parents for a house deposit? Try to make the conversation open and practical, explaining what you need, why you're asking and how their help could make a difference (we’d probably suggest bringing out the good biscuits for this one).

Try this simple approach:

• Agree a time to sit down and talk to them about money.

• Start by being open about what you're trying to achieve and how much help you need. Explain whether you're asking for a gift, a loan or another form of support.

• Show that you've done your homework. Have details of your income, spending, savings and the type of property you're hoping to buy ready.

• Listen. They may have questions or worries, and that's fair. Treat it as a chat, not a demand.

• Most importantly, give your parents space to say no. A no isn't a dead end – it just means it's time to look at plan B.

If your family can't help, don't assume buying a home is out of reach. A mortgage adviser can talk you through the other options available.

I'm a parent. How can I raise money for my child's house deposit?

If you want to help your child with a house deposit, there are several options to consider:

• Savings. This can be the simplest option if you have enough cash set aside without hurting your own finances.

• Pension lump sum. Some people take part of their pension as a lump sum. Speak to a financial adviser first, as this could reduce your future income.

• Remortgage. You may be able to release equity from your home. This will increase your borrowing and repayments.

• Cash in investments. You could sell some investments to raise money for the deposit. Check the tax and investment risks before you do so.

Use our Remortgage Calculator to help you work out how much you might be able to remortgage for.

Before giving or lending money, make sure you can still meet your own financial commitments. If necessary, speak to a financial adviser about what's right for your own retirement plans, not just your child's move.