When people think about putting down a deposit for a house, they usually imagine saving up tens of thousands of pounds in cash over many years. And yes—having a traditional savings pot is one way to do it. But what if we told you there are other, lesser-known ways to raise a deposit and get onto the property ladder faster?
Whether you’re a first-time buyer or looking to move up the property ladder, here are five surprising things you may not know you can use as a deposit.
Let’s dive in!
- Gifted Deposit from Family or Friends
One of the most common—but often misunderstood—alternatives to saving a full deposit is a gifted deposit. This is where a family member (usually a parent or grandparent) gives you money to use as part or all of your house deposit.
The key word here is ‘gifted’—it cannot be a loan that you’re expected to repay, as lenders need to be sure there are no future claims on the property.
What do lenders need?
- A signed gifted deposit letter confirming the money is a gift with no repayment terms.
- Proof of ID and address from the person gifting the money.
- Sometimes evidence of where the money came from (e.g. savings).
This option is incredibly helpful for first-time buyers who may be struggling to save while paying rent.
- Equity from Another Property
If you already own a home or are selling one, you might be able to use the equity (the value of your home minus the mortgage balance) as your deposit on a new property.
For example, if your home is worth £300,000 and your outstanding mortgage is £200,000, you have £100,000 in equity. When you sell and pay off your mortgage, the remaining equity can be used as your deposit.
Bonus: If you’re porting your mortgage (moving it to your new property), you might not need to start from scratch.
This route is ideal for second steppers who want to move to a larger home without needing a fresh cash deposit.
- Inheritance Funds
Receiving an inheritance—whether large or small—can be a life-changing moment. What many people don’t realise is that you can use inherited funds as a house deposit.
Most lenders are happy with this, but you’ll need to provide:
- Evidence of the inheritance (e.g. a letter from the executor or solicitor).
- Proof the money is now in your account.
- Possibly a copy of the will or probate confirmation.
Be mindful of inheritance tax implications if the estate is over the threshold—but generally, inherited money is a perfectly acceptable source for your mortgage deposit.
- Vendor Gifted Deposit (In Specific Circumstances)
This one’s less well-known. In some property transactions, the seller (vendor) agrees to contribute toward the buyer’s deposit as part of the sale negotiation. This is known as a vendor gifted deposit or builder’s incentive, especially in new-build homes.
However, it’s not always straightforward. Lenders can be wary of this because they want to ensure the buyer is financially committed. Some will accept it—especially if the value of the home is independently verified and the incentives don’t affect the loan-to-value (LTV) calculation.
Always check with a broker before assuming this is an option.
- Lifetime ISA (LISA)
The Lifetime ISA is a brilliant government scheme that rewards savers who are planning to buy their first home.
Here’s how it works:
- You can save up to £4,000 a year, and the government adds a 25% bonus (up to £1,000 annually).
- You must be aged 18 to 39 to open one.
- The property you’re buying must cost £450,000 or less.
- You need to have had the account open for at least 12 months before using it.
Many first-time buyers don’t realise how generous this scheme is—it’s essentially free money toward your deposit.
And yes, most major lenders accept LISAs as a valid deposit source.
Please note: You will incur a lifetime ISA government withdrawal charge (currently 25%) if you transfer the funds to a different ISA or withdraw the funds before age 60 and you may therefore get back less than you paid into a lifetime ISA.
By saving in a lifetime ISA instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:
(i) you may lose the benefit of contributions from your employer (if any) to that scheme; and
(ii) your current and future entitlement to means tested benefits (if any) may be affected.
HLC cannot advise you on the setting up of Lifetime ISAs.
A Few Important Notes
Before using any of the above deposit options, keep in mind:
- Lenders require proof of where your deposit came from to meet anti-money laundering regulations.
- Not all lenders accept all deposit sources—this is where a whole-of-market mortgage broker (like us!) can guide you to the right lenders.
- Even with a gifted or unconventional deposit, affordability checks still apply, so your income and credit score matter too.
Final Thoughts
Saving for a deposit can feel like climbing a mountain, but as you can see, there are more routes to the top than you might think. From gifted deposits and LISAs to equity and inheritance, there are plenty of smart, legitimate ways to get you closer to your dream home.
At HLC Mortgages, we specialise in helping people use all kinds of deposit sources to secure the most suitable mortgage deal possible. If you’re unsure whether your deposit will be accepted—or you want help understanding your options—we’re here to guide you every step of the way.
Ready to Explore Your Options?
Give us a call or book a free consultation. Let’s chat about how we can turn your deposit—whatever form it takes—into your perfect home.
Your home may be repossessed if you do not keep up repayments on your mortgage.