What is a Gift Letter and Why Do You Need One?
A gift letter is a formal document stating that money given to a homebuyer is a non-repayable gift and not a loan. When you’re applying for a mortgage in Ireland—especially with a bank like AIB (Allied Irish Banks)—this document helps clarify the source of your deposit, which is crucial for bank approval.
Gift letters are most commonly used when a parent, relative, or friend gives money to help with a house deposit, usually as part of first-time buyer support.
Importance of a Gift Letter in the Irish Mortgage Process
Ireland has strict anti-money laundering laws and banking regulations, especially around large transfers of money. For this reason, if you’re receiving a gifted deposit, your lender will likely ask for a formal gift letter. This applies to all major banks, including AIB, BOI, PTSB, and EBS.
How Banks View Gifted Deposits
Banks like AIB view gifted funds as acceptable sources of deposit if the transaction is clearly documented. This reassures them that:
- The money is not a loan.
- No undue financial strain will exist post-purchase.
- There’s no hidden liability.
Anti-Money Laundering Considerations
AIB is legally required to vet all funds used in home purchases. Gift letters are part of their internal controls to detect:
- Illegitimate transfers
- Undeclared loans
- Financial coercion or fraud
AIB’s Requirements for a Gift Letter
AIB has specific formatting requirements when accepting gift letters. These include identity verification, written confirmation that the gift is not a loan, and proof that the giver has the ability to gift the stated amount.
Template Structure AIB Recommends
An AIB-approved gift letter usually contains:
- Donor’s full name, address, and relation to the buyer
- Amount of the gift
- Confirmation it’s non-repayable
- Both donor and recipient’s signatures
- Notarisation (sometimes required)
Supporting Documentation You’ll Need
Along with the letter, AIB might also request:
- Donor’s photo ID
- Proof of funds (e.g., bank statement)
- Source of funds explanation (if needed)
- Confirmation from solicitor in some cases
Who Can Gift You the Money?
Gifted deposits are commonly provided by family members, though in some cases friends or distant relatives can also gift.
Immediate Family Members
Generally accepted donors include:
- Parents
- Grandparents
- Siblings
- Aunts/Uncles (occasionally)
Gifts from these sources are widely accepted by AIB and raise fewer concerns.
Non-Relatives or Friends – Is It Allowed?
While it’s not common, friends can gift money, but expect:
- More detailed documentation
- Legal clarification that it’s not a loan
- Possibly solicitor involvement
How Much Money Can Be Gifted for a Mortgage?
There’s no legal cap on the amount that can be gifted. However, AIB may question large gifts, particularly if they cover 100% of the deposit.
Percentage Limits vs. Total Deposit
While there’s no fixed limit, banks generally prefer:
- At least 10-20% of the deposit to come from the buyer’s own savings.
- If the entire deposit is gifted, you’ll need strong documentation to satisfy the bank’s concerns.
Tax Implications of Receiving a Gift
While receiving money might feel simple, Irish tax law says otherwise.
Thresholds and Capital Acquisitions Tax (CAT)
Gifts are subject to Capital Acquisitions Tax (CAT) if they exceed a certain threshold. For example:
- Parent to child: €335,000 (as of 2025)
- Siblings, grandparents, aunts/uncles: €32,500
- Others: €16,250
If your gift is over the threshold, you’ll pay 33% CAT on the excess. Be sure to check with a tax advisor or Revenue.ie: https://www.revenue.ie
How to Draft a Gift Letter for AIB
Writing a gift letter doesn’t have to be stressful. Follow AIB’s structure and you’ll be fine.
Essential Elements Every Letter Must Include
- Statement of the gifted amount
- That it’s not repayable
- Relationship between donor and recipient
- Donor’s signature and date
- Recipient’s signature and date
Common Mistakes to Avoid
- Leaving out “non-repayable” terminology
- Forgetting to sign/date the letter
- Omitting bank details or ID
- Using vague language
Sample AIB Gift Letter Template
[Your Full Name]
[Your Address]
[Date]
To Whom It May Concern,
I, [Donor’s Full Name], residing at [Address], confirm that I am gifting the amount of €[Amount] to my [relation], [Recipient’s Full Name], to assist with the purchase of a property at [Property Address].
This gift is unconditional, non-repayable, and given freely without any expectation of repayment now or in the future. The funds have been transferred from my account at [Bank Name], IBAN [IBAN Number].
I confirm I have no beneficial interest in the property being purchased and am not a party to the mortgage application.
Signed,
[Donor’s Signature]
[Recipient’s Signature] Legal Advice: Is It Required?
In most cases, legal advice is optional—but recommended when:
- The gift is substantial
- The donor is not a close family member
- Solicitor clarification is requested by the bank
Having a solicitor draft or verify the letter can expedite the mortgage process and prevent delays.
AIB vs Other Irish Banks: How Gift Letter Policies Differ
While AIB has some of the strictest vetting, most Irish banks have similar requirements:
- BOI and PTSB require similar documents
- EBS may require extra clarification
- Credit unions may be more flexible
Always check your specific bank’s requirements in advance.
How to Submit the Gift Letter to AIB
Online vs In-Person Submission
AIB allows you to submit documents via:
- Online banking portal
- Your mortgage advisor
- In-person at a branch
Make sure your document is clear, signed, and in PDF format for online uploads.
What Happens After Submission?
Once submitted, AIB will:
- Review the letter and supporting docs
- Request clarifications if needed
- Add it to your mortgage file
- Notify you when it’s approved or rejected
Real-Life Case Study: AIB Mortgage Success with a Gift Letter
Take the story of Aoife and Daniel in Dublin. With Aoife’s parents gifting €20,000, they used an AIB gift letter template, had it signed, submitted IDs and proof of funds. AIB approved their mortgage within 10 working days.
Their solicitor advised adding a clause in the deeds that stated no ownership interest from the parents—this helped avoid delays at the legal stage.
Expert Tips for Ensuring a Smooth Mortgage Process
- Start early with documentation
- Double-check all bank requirements
- Avoid sending scanned photos—use PDFs
- If in doubt, ask your mortgage broker or solicitor
Frequently Asked Questions (FAQs)
1. Can I receive my entire deposit as a gift for an AIB mortgage?
Yes, but AIB will scrutinize the source and request strong documentation.
2. Does a gift letter need to be notarized?
Not always, but notarisation adds credibility and may be required for large gifts.
3. Can a friend give me a mortgage gift?
Yes, but expect stricter vetting and potential solicitor involvement.
4. Is Capital Acquisitions Tax always payable?
No, only if your gift exceeds the tax-free threshold based on your relationship.
5. What happens if the donor lives outside Ireland?
You’ll need international ID, proof of address, and sometimes translated documents.
6. Do I need to inform Revenue about the gift?
Yes, especially if the gift exceeds tax-free thresholds. Use Revenue’s CAT return system.
Conclusion
If you’re applying for a mortgage with AIB and receiving help from family or friends, a properly formatted gift letter can make or break your mortgage approval. By following AIB’s guidelines and ensuring all documentation is clear and legitimate, you’ll position yourself for a smooth, stress-free home-buying journey.
When in doubt, speak with your solicitor or mortgage broker—they’ve been through this process countless times and can guide you every step of the way.
