Buying a Home With a Gifted Deposit From a Friend

Buying a home with a gifted deposit from a friend can be possible, but lenders generally prefer gifts from relatives and may assess a friend’s contribution differently. The money must be a genuine gift, not a loan: your friend must not expect repayment or a share in the property. Tell your lender about the gift and provide the documents it requests.

It’s understandable to wonder whether a friend’s help could complicate your mortgage application. The key is to be clear about where the money came from and what the donor expects in return. This guide explains what counts as a gifted deposit, how lenders may assess a friend’s contribution, and what to include in the gift declaration and supporting documents.

You’ll also learn how to keep a clear record of the money for your mortgage lender and conveyancing solicitor, so you can raise the arrangement early and prepare for the checks.

What is a gifted deposit?

A gifted deposit is money from someone else towards your home purchase, rather than money from your own savings. To count as a gift, the donor must not expect repayment or a share in the property.

A friend’s contribution can help build your deposit, but lenders and conveyancing solicitors need to know who provided it and where it came from. Their checks help establish that the money is a genuine gift and provide evidence for anti-money-laundering checks.

Checking the donor and their funds

These checks establish the donor’s identity, their relationship to you and the source of their funds. Your solicitor may ask the donor for photographic identification and proof of address, then carry out an electronic identity check. They may also request bank statements showing the donor’s name and address for 3-6 months. This evidence helps show where the money came from and supports the solicitor’s anti-money-laundering checks.

Lenders may also ask how you know the friend and for proof that the gifted funds have reached you. A transfer record and relevant bank statements can help explain how the money moved.

Declaring the gift to a lender

Declaring the gift means telling your mortgage lender that someone else is contributing to your deposit and providing the requested evidence. A signed declaration usually identifies the donor, states the amount and confirms that repayment isn’t expected. It also confirms that the donor won’t live in the property or hold an interest or charge over it.

Tell the lender about the gift as part of your mortgage application, rather than presenting it as your own savings. The lender considers whether the contribution is genuinely a gift and assesses whether you can afford the mortgage repayments. Written confirmation may be needed before the purchase contract is finalised. If several people contribute, provide separate information and a declaration for each gift.

Arranging a gift from a friend

To arrange the gift, agree with your friend that it is non-repayable, disclose it to your lender, and provide the requested declaration and evidence. The donor should transfer the money from their personal bank account to yours. You can then send it to your solicitor, keeping the transfer records to show a clear paper trail.

Does the gift need to be repaid or come with conditions? No. A genuine gifted deposit isn’t repayable, and the donor must not expect a share or security over the property. If your friend expects repayment, the contribution isn’t a pure gift.

In the UK, a gifted deposit may be subject to inheritance tax if the gifted amount is above £3,000, the donor has no further tax allowance, and the donor dies within seven years of making the gift, according to HM Revenue & Customs. This is a separate consideration from the lender’s mortgage checks.

Telling the lender about recent gifted deposits

Tell your mortgage lender about your friend’s contribution before relying on it for your house deposit. Lenders assess gifted funds as part of the application, and their policies differ.

There isn’t one rule shared by every UK mortgage lender about gifts from friends. Lenders generally prefer a gift from a family member, but some may consider a friend’s contribution under their own criteria.

Lender acceptance and gift policies

Lender acceptance means the lender is willing to count the gifted money towards your deposit under its rules. This matters because the decision can affect which mortgage options suit your purchase. Lenders generally prefer a family member’s gift, while a friend’s contribution may receive closer scrutiny.

Tell the lender who is providing the money and explain your relationship. The lender may ask for a signed declaration confirming that the gift isn’t repayable and the donor won’t hold a legal charge over the property. Written confirmation may be needed before the purchase contract is finalised, so raise the gift early rather than waiting until the funds are needed.

Affordability and loan-to-value effects

A gifted deposit can increase the deposit available and reduce the mortgage needed against the property’s value. This changes the loan-to-value ratio, or LTV: the proportion of the property value covered by the mortgage. A lower LTV may affect the mortgage options available, but it doesn’t establish whether the monthly repayments are affordable.

Lenders also assess whether your income and existing financial commitments allow you to meet repayments. They check whether the contribution is genuinely a gift, including whether you’ll need to repay it. If repayment is expected, it isn’t a pure gift and could affect your outgoings and affordability assessment.

Tell the lender if your friend transferred money shortly before your application or plans to contribute later. Explain the amount, when it was or will be received, and whether the donor expects anything in return. Provide the requested evidence of the funds and their source so the lender can assess the deposit as part of your application, rather than treating it as unexplained savings.

If your friend’s contribution is a condition of the purchase, explain that clearly. A genuine gift must not involve repayment, a share in the property or security for the donor. The lender needs an accurate picture of the arrangement before deciding whether it can accept the deposit and how it affects your mortgage application. Its criteria, affordability checks and LTV assessment all matter. The largest deposit isn’t the only factor when choosing a suitable mortgage.

Gifted deposit letters and required details

A gifted deposit letter records who is giving the money, how much they’re contributing and the terms of the gift. Bank statements and transfer records help explain the funds to the lender and solicitor.

Gift letter requirements

A gifted deposit letter is the donor’s written confirmation that their contribution is a genuine gift. It matters because the lender needs to know whether you must repay the money or give the donor rights over the property.

The letter should identify you and the donor, state your relationship and confirm the amount being given. It should also say that repayment isn’t required and the donor won’t live in the home, hold a share or place a legal charge over it.

Your friend should sign and return the declaration to the conveyancing solicitor before completion. Some lenders may ask for a witness signature or solicitor’s stamp, so the required format can vary. If someone else is also giving money, provide separate details and a declaration for each contribution.

Make sure the wording matches the actual arrangement. For example, a letter stating “no repayment expected” won’t accurately describe the contribution if your friend expects you to pay them back. That would be a loan, not a pure gift, and should be disclosed as such.

Required bank statements

Bank statements provide evidence of the funds’ source and help show the transfer trail. The donor may need to provide statements covering 3-6 months, showing their name and address, while you may be asked for statements showing the gift arriving.

Keep the transfer records with both sets of bank statements. A clear trail shows your friend sending the money from their personal account to yours, followed by your transfer to the conveyancing solicitor. The dates and amounts should make the movement easy to follow.

If the donor’s statement shows the gifted funds arriving as a recent large deposit, the lender or solicitor may ask for evidence explaining where that money came from. This could include the relevant transaction or supporting records. The aim is to document the origin of the gift, not just its arrival in your account.

Send the letter, statements and transfer evidence together when requested, and keep copies for your records. If the gift arrives in separate transfers, include evidence for each one. A complete paper trail helps the lender assess the deposit and gives the solicitor documents for the purchase checks.

Donor identification and proof of address

The donor’s identity documents help the conveyancing solicitor check who is providing the deposit. The solicitor also needs to understand the donor’s relationship to you and where the money came from.

For anti-money-laundering checks, the donor must provide photographic identification and proof of address. The solicitor will carry out an electronic identity check. These checks help connect the named donor with the person giving the funds and verify the source of the money.

Make sure the donor’s documents match the details in the signed gift declaration. For example, if your friend is named as the donor, their identification should match the name on the declaration and relevant bank records. If a name differs, explain why and provide any supporting evidence the solicitor requests. This helps avoid confusion about who is giving the deposit.

Your lender may ask for evidence of your relationship with the donor. A friend’s gift may need a clear explanation of how you know each other, while a gift from a parent or another relative can be described by the family relationship. The lender may also want evidence that the funds have arrived. Keep the declaration and transfer records consistent with the donor’s identity.

Can a friend receive a share of the property in return for the deposit? No, not as a pure gifted deposit. If your friend expects repayment, an ownership share or a legal charge over the home, the money isn’t an unconditional gift and you must explain the arrangement accurately to the lender.

That distinction matters for both of you. A donor who expects rights over the property shouldn’t sign a declaration saying they have no interest. Before signing, discuss the proposed arrangement with your conveyancing solicitor. The solicitor can explain the legal implications, including any intended ownership interest, so the declaration reflects what you and your friend have actually agreed.

There may also be tax considerations for the person giving the money. HM Revenue & Customs says a gifted deposit may be subject to inheritance tax if the gift is above £3,000, the donor has no further tax allowance, and they die within seven years of making it. That is separate from lender and solicitor identity checks, so donors should consider their own circumstances and keep records of the gift.

Respond promptly if the solicitor asks for a clearer copy of identification, proof of address or an explanation of your relationship. Providing the requested records together helps the solicitor connect the donor, signed declaration and source of funds, and keeps the purchase checks moving.

Whether friends can provide gifted deposits

Yes, a friend can contribute to your deposit if the mortgage lender accepts the arrangement. The main risks are lender refusal, unclear gift terms and evidence that doesn’t explain where the money came from.

Friends as deposit donors

A friend’s contribution is a gifted deposit only when it is genuinely non-repayable and gives them no share in your home. This matters because lenders generally prefer a gift from a relative, such as a parent, and assess a friend’s contribution under their own criteria.

Tell the lender who your friend is and how much they’re giving. Lenders may ask for a signed declaration and supporting evidence before counting the money towards your house deposit. Don’t describe it as a gift if your friend expects repayment or ownership rights.

For a buyer getting onto the property ladder, a friend’s savings can increase the deposit available. That can reduce the amount borrowed compared with relying on personal savings alone, but it doesn’t determine whether the lender will accept the donor. The lender still assesses your application, the source of the money and your ability to afford repayments.

Unlike a contribution from a family member, a friend’s gift may need a clearer explanation of your relationship. Give the lender an accurate account, then provide the declaration and supporting documents it requests. If someone else is also giving money, set out each contribution separately so the lender can identify the donors and their respective gifts.

Risks of a friend’s gift

The main risk is that the lender won’t accept your friend’s contribution under its criteria. If the money can’t be used for the purchase, you may need to reconsider your deposit arrangements.

A second risk arises if the donor expects repayment, a share in the property or a legal charge. Those conditions mean the funds aren’t a pure gift. Describing them otherwise could give the lender an inaccurate picture of your deposit and financial commitments.

Timing and documentation can also affect the purchase. If the lender or conveyancing solicitor needs more evidence about your friend’s identity, your relationship or the funds, the application and transaction may require further information. Keep transfer records and statements together, and make sure the signed declaration reflects your actual agreement.

Before relying on the money, tell the lender that your friend is giving it and explain any conditions openly. This allows the lender to assess the deposit and your mortgage application accurately. A clear agreement also helps both friends understand that a genuine gift creates no repayment expectations or property rights.

Lee Tonks: Mortgage Guru: Bad Credit Mortgages

Lee Tonks: Mortgage Guru can help you explore mortgage options when a friend is contributing to your deposit. The lender’s rules for gifts sit alongside its assessment of your income, credit history and ability to afford repayments, so it’s useful to understand the full picture before proceeding.

If you’re a first-time buyer or have adverse credit, Lee Tonks: Mortgage Guru can help you explore options such as First-Time Buyer Mortgages or Bad Credit Mortgages. Lender criteria vary, and the lowest rate isn’t always the most suitable for your circumstances. Approval and borrowing depend on the lender’s assessment.

Contact Lee Tonks: Mortgage Guru to discuss your deposit and mortgage options.

Make your next mortgage decision with confidence

Buying a home with a gifted deposit from a friend involves more than deciding whether the money can help you reach your purchase goal. Consider the wider application too: your income, credit history, ongoing commitments and how the mortgage repayments would fit your budget.

Lee Tonks: Mortgage Guru offers First-Time Buyer Mortgages, Bad Credit Mortgages and Self-Employed & CIS Mortgages. These may be relevant if your deposit question sits alongside a first purchase, credit concerns or self-employment income. The lowest rate isn’t always the most suitable option, so weigh the mortgage features and affordability alongside the deposit arrangement.

This article is for information only, not personal mortgage advice. Lender criteria vary, and the suitable route depends on your circumstances.

If you’d like to talk through your situation and possible next steps, you can contact Lee Tonks: Mortgage Guru.

With the right information, you can approach your next decision with greater clarity.

Frequently Asked Questions

What proof will you need?

Expect to provide documents showing who gave the money, where it came from and how it reached your account. For example, the donor’s bank statement can show the funds leaving their account, while your statement or transfer record shows their arrival. The solicitor may also request the donor’s photographic identification and proof of address. Lenders may ask for evidence of your relationship with the donor.

How much can you gift for a house, and are there any effects on tax?

The giver can choose the amount, but the mortgage lender must accept the gift under its criteria. A gift is not subject to immediate UK gift tax. However, according to HM Revenue & Customs, inheritance tax may apply if the gift is above £3,000, the donor has no further tax allowance, and they die within seven years of making it. The donor’s wider circumstances affect the tax position.

Who can give you money for a deposit?

Someone other than the buyer can contribute money, but the lender’s rules determine whether it can count towards your deposit. Parents, grandparents and siblings are common donors, and lenders generally prefer gifts from relatives. A friend may also contribute if the lender accepts the arrangement. Describe the donor’s relationship to you accurately, rather than presenting it as a family connection to fit a lender’s preferred category.

Who can provide a Gift Deposit?

A gifted deposit can come from someone other than the buyer, including a relative or friend, provided it is genuinely non-repayable. If more than one person contributes, keep each gift identifiable. The lender may require separate information and a declaration for each donor. A contribution involving repayment, ownership rights or a charge over the property isn’t a straightforward gift and must be disclosed accurately.

Can a friend gift a deposit for a UK house purchase?

Yes, buying a home with a gifted deposit from a friend is possible if the lender accepts the arrangement. Lenders generally prefer gifts from relatives, so a friend’s contribution may receive closer consideration under the lender’s criteria. Explain who your friend is, confirm that repayment isn’t expected and provide the requested information. Don’t rely on the money as a deposit until the lender has considered the gift.

What evidence and documents do UK lenders require for a gifted deposit?

Requirements vary between lenders, but the paperwork can include a signed gift declaration, donor identification, proof of address, bank statements and transfer records. The donor’s statements may cover 3-6 months and show their name and address. Your own bank records can evidence receipt. If a statement shows a recent large credit, supporting records may help explain its origin and connect it to the donor’s available funds.

Will a friend’s gifted deposit trigger UK inheritance tax or other tax?

A genuine cash gift has no immediate UK gift tax, but inheritance tax can be relevant to the donor’s estate. According to HM Revenue & Customs, a gift above £3,000 may be subject to inheritance tax if the donor has no further tax allowance and dies within seven years of making it. This does not mean every gift creates a tax bill. The donor’s allowances and circumstances matter.

What anti-money-laundering checks apply to gifted deposits from friends?

The conveyancing solicitor verifies the source of the money for anti-money-laundering checks. Your friend may need to provide photographic identification, proof of address and bank statements showing the origin and movement of the funds. The solicitor also carries out an electronic identity check. Clear records help connect the donor, the funds and the property transaction. Mortgage applications and borrowing remain subject to lender criteria.