
First homebuyer e-course
Sign up for our FREE 8-week course to get on the property ladder.
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
Some home buyers struggle to save the money for a house deposit. But if you're in a fortunate enough position, your parents could help you with part of the deposit as a gift. Many lenders will accept this but may require a gift letter to support the application.
Provided by a parent, guardian or close relative such as your grandparents, a gift letter confirms that someone is providing you with the funds to complete a deposit for a home loan. The gift letter must state that the deposit is an “unconditional” gift. Generally, it should not be repayable (some lenders may make an exception for this).
Most lenders require the gift to be held in the account for a minimum of three months prior to purchase application approval, particularly if you have less than 20% of the deposit saved up.
In some cases, lenders will need to confirm the source of your deposit to ensure that you are not sourcing the funds from credit cards, a personal loan or any other form of finance. In other words, the lender wants to make sure that you have not taken out another form of finance and won’t become preoccupied with servicing other debts.
If your parent or family member has agreed to gift you the deposit for a home loan, you will need to approach your lender to see whether or not a gifted deposit will be accepted. If so, you’ll need to provide the lender with a standard gift letter, an example of which is detailed below.
Most borrowers need to show proof of at least 5% in genuine savings, such as regular deposits from a salary over a period of no less than three months. The lender will ask to see recent bank statements as evidence of due diligence and financial discipline. If the lender doesn’t believe you can demonstrate financial discipline and the ability to put money away, you may be charged a higher interest rate or your application may be denied.
Australian lenders have strict requirements about what needs to be included in the gift letter, including but not limited to:
02/01/2016
To whom it may concern,
Re: Natasha Gyles
I confirm that I am giving my daughter Natasha Gyles an unconditional gift of $65,000 for her to use to buy a property located in Mona Vale, NSW. I confirm that this gift is non-repayable and non-refundable.
Should you require any additional information regarding this gift, please do not hesitate to contact me on 02 XXX XXXX.
Regards,
(parent signature)
Mitchell Gyles
1 York St
Sydney NSW 2000
You should speak to your lender or broker about any other steps required to ensure the acceptance of your gift letter.
Alternatively, some lenders may specifically request a statutory declaration to confirm the gifted deposit. An example of a statutory declaration form is detailed below.
A bank will often ask for a statutory declaration as a precautionary measure to ensure that the gifted deposit is being provided by a family member, that it is “unconditional” and preferably “non-repayable.”
Learn more about filling out a statutory declaration.
If your gifted deposit is less than 20% loan-to-value ratio (LVR), you may need to pay LMI. However, it’s likely that you’ll be able to capitalise LMI into your loan (or add the premium to your total loan).
For instance, if you have to pay an LMI premium of $7,400 and your loan is $620,000, your lender might allow you to borrow $627,400.
Enter your details in the calculator below to work out how much you can afford to borrow.
Back to topWhile some lenders will not lend funds to borrowers who have received their deposit money as a gift, there are several Australian lenders, such as the Commonwealth Bank of Australia and ING Direct, that will accept a gifted deposit for your loan application.
It’s important to note if you borrow the deposit from your parents and intend to repay the amount later, this is considered a loan and not a gift. Some lenders won’t accept this type of loan arrangement.
Obtaining home loan pre-approval from a lender is an important step in the home buying journey. Find out what’s involved in the process here.
It can be tempting to stretch the truth on your home loan application, but the risks far outweigh the benefits.
Entering into a home loan can be tricky if lenders are suspicious of your ability to exit it. This is why a good home loan exit strategy is vital.
The amount you can borrow and the amount you should borrow for a home loan can be two different amounts.
When you apply for a home loan, a lender will take many serviceability factors into consideration when deciding whether or not to approve your application.
When you apply for a home loan, the lender will assess a range of factors to determine whether or not you can afford to repay the money you borrow.
Your gambling habits could influence your ability to qualify for a home loan. Here's how it all works.
Here are loads of expert tips to help you borrow what you need for your home or investment property, without breaking the bank.
If you’re trying to get a home loan, you can speed it up the approval process by organising it before you apply.
Find out how to increase your borrowing power and get approved for a mortgage even if you have a car loan.
Sign up for our FREE 8-week course to get on the property ladder.
Get a cash lump sum of $2,000+ for refinancing to a low-rate loan.
Pay less for your home loan with a super-low interest rate.
Save on your investment loan with these hot offers.