Using a cash gift for a home loan deposit

Hand holding a wrapped present.Home buyers with generous parents can use a gift of cash as a deposit, but you still need to prove you can repay your lender.

It's common for parents to help their kids buy property. Most lenders are happy for immediate family members to give 'non-refundable gifts' of cash to boost a borrower's mortgage deposit.

But there are a few rules you need to know to make sure your gift meets the bank’s criteria.

When money is gifted to a property-buyer close to purchase time, a gift letter or statutory declaration needs to be signed by the family member, stating that the money is to be used for the purchase of property and that the loan is unconditional. The rules around non-refundable gifts state that it needs to be from an immediate family member, which includes de facto, siblings, grandparents as well as parents.

Learn more about gift letters for home loans

Mortgage Broker Daniel Corran from McCombe Finance says lenders often require that the gift be held in the account for a minimum of three months before purchase application approval.

This is especially the case, Corran says, when a potential home-buyer has less than a 20 per cent deposit saved up, as this is the minimum amount required under the bank’s mortgage lenders’ insurance policy, which protects the bank against the risk of a borrower defaulting on a loan.

Most borrowers also need to demonstrate their own minimum 5 per cent of genuine savings. The bank will sometimes ask to see a person’s previous banking records as evidence that a person is able to save money over a continuous period and is therefore likely to be able to service a home loan.

Read the full guide to saving a home loan deposit

"The paperwork required regarding the gift differs between lenders,” Corran says. So it’s wise to get some help from a mortgage broker or do your research before submitting a loan application with a non-refundable gift included.

Corran says some families consider using their own home or an investment property as security in a “family-pledge” situation rather than gifting cash, however, if the borrower defaults on their mortgage, then the family member’s property is at risk when it is cross-secured. For this reason, Corran says non-refundable gifts are usually safer for families as there is no recourse against assets.

The final point Corran tells his clients when they’re considering giving a non-refundable gift to a family member is to make sure that it’s not self-sacrificing and that it doesn’t jeopardise the financial position of the gift-giver.

'The giftor should seek independent financial advice for themselves to ensure their viability to give the gift – to make sure it’s not going to significantly reduce the giftor’s standard of living or interrupt their cash flow,' he says.

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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.59%
$0
$0 p.a.
80%
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3.79%
3.82%
$445
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3.59%
5.17%
$595
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3.79%
3.79%
$0
$0 p.a.
95%
Competitive, flexible rate mortgage with simple features and low fees. Low deposit option available.
3.59%
4.62%
$445
$6 monthly ($72 p.a.)
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NSW and ACT customers only. 2 years fixed interest terms and free access to redraw facility online.
3.59%
3.62%
$500
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This mortgage combines a very sharp interest rate with a 100% offset account and it's available with a 5% deposit.
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3.78%
$0
$10 monthly ($120 p.a.)
80%
Get a competitive variable rate and a 100% offset account.
3.48%
3.63%
$600
$10 monthly ($120 p.a.)
80%
A competitive variable rate for home buyers with a 20% deposit. This product has a 100% offset account.
3.97%
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$0
$0 p.a.
80%
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
3.64%
4.63%
$300
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Low fixed rate loan for home buyers. Available with a 10% deposit. 100% offset account attached.
3.74%
4.31%
$0
$395 p.a.
80%
Lock in a competitive rate for owner occupiers for two years. Extra repayments up to $30,000 over the life of the fixed period can be made.
3.74%
4.13%
$0
$349 p.a.
90%
Get a sharp rate plus package discounts and a 100% offset account.
3.79%
3.89%
$600
$0 p.a.
70%
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3.69%
4.08%
$0
$395 p.a.
90%
A high maximum LVR home loan with redraw facility and additional payments. Get this mortgage with a 10% deposit.
3.69%
3.69%
$0
$0 p.a.
95%
A low deposit mortgage with a competitive rate and plenty of flexibility. QLD residents only. Eligible borrowers can get a 15% discount on home and contents insurance for the life of their loan.
3.59%
4.53%
$445
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online.
3.68%
3.77%
$0
$10 monthly ($120 p.a.)
90%
Low fixed rate mortgage that lets new home buyers borrow up to 90%. For a limited time, eligible borrowers can earn double Velocity points.
3.82%
3.83%
$0
$0 p.a.
110%
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3.73%
3.87%
$0
$10 monthly ($120 p.a.)
80%
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3.69%
4.09%
$0
$395 p.a.
95%
Get interest rate discounts and waived fees on this package loan with a 100% offset account. $500 cashback offer for first homebuyers borrowing over 80% and paying LMI.
3.79%
3.79%
$0
$0 p.a.
80%
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.59%
3.97%
$395
$0 p.a.
80%
A competitive fixed interest rate product with no ongoing bank fees.
3.69%
3.90%
$0
$10 monthly ($120 p.a.)
90%
Get Velocity Frequent Flyer Points at settlement, monthly and every three years, plus the option to make up to $10,000 a year in extra repayments.
3.79%
3.79%
$0
$0 p.a.
80%
Low fee loan with extra repayments. Pay no application and ongoing fees and take advantage of split and redraw options.
3.77%
3.82%
$600
$0 p.a.
80%
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
3.79%
4.22%
$0
$395 p.a.
80%
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
3.49%
4.46%
$0
$0 p.a.
90%
A discounted 1 year fixed rate for home buyers that's available with a 10% deposit. NSW, QLD and ACT residents only.
3.97%
4.02%
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