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Using a cash gift for a home loan deposit

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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Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
2.78%
2.79%
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$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
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2.66%
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80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
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$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
HSBC Fixed Rate Home Loan - 2 Year Fixed Rate LVR 80% or below (Owner Occupier, P&I)
2.09%
2.98%
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Lock in a competitive fixed rate for 2 years and buy your home with a 20% deposit.
IMB Budget Home Loan - Special LVR <=90% (Owner Occupier, P&I, NSW and ACT borrowers only)
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2.84%
$449
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NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
2.94%
2.95%
$0
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Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, QLD and ACT only.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 1 Year Fixed (Owner Occupier, P&I)
2.39%
3.85%
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Enjoy a competitive rate with no application fee for this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Bankwest Complete Home Loan Package Variable - $200k to <$750k LVR <=80% (Owner Occupier, P&I)
2.73%
3.18%
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A low variable rate loan with a 100% offset account and package discounts.
Newcastle Permanent Building Society Real Deal Home Loan - Special Offer 1 (Owner Occupier, P&I)
2.59%
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IMB Fixed Rate Home Loan - 2 Year Fixed (LVR 90% Owner Occupier, P&I, NSW and ACT borrowers only)
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Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 3 Year Fixed (Owner Occupier, P&I)
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CUA Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier, P&I)
2.49%
3.99%
$600
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Pay no ongoing fees and lock in your rate for 3 years to organise your budget. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs.
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier, P&I)
2.49%
4.12%
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IMB Fixed Rate Home Loan - 3 Years Fixed (LVR ≤90% Investor, P&I, NSW and ACT borrowers only)
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3.59%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. A 3 years fixed rate investor which allows extra repayments to be made.
BankSA Basic Home Loan - Owner Occupier, P&I
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2.66%
$500 (waived for loans above $150,000)
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80%
Refinancers borrowing $200,000 or more can get can get up to $3,000 cashback (Other terms, conditions and exclusions apply). Buyers and refinancers can get this competitive variable interest rate. A low variable interest rate for home buyers and refinancers. Application fee waived for loans above $150,000.
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Athena Variable Home Loan - Owner Occupier, P&I

Owner-occupiers with 20% deposits can get this competitive variable rate mortgage. $0 application fee and $0 ongoing fees.

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UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

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HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)

Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.

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Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)

Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000. Refinance to an eligible Suncorp loan and get a cashback of $2,000 or $3,000, depending on your loan amount. Other conditions apply.

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