How to use a cash gift as your home loan deposit | Finder

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.

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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.

Compare loans for first home buyers

Data updated regularly
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years
Name Product Interest Rate (p.a.) Comp. Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Suncorp Back to Basics Home Loan
2.44%
2.45%
$0
$0 p.a.
80%
$589.12
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
Greater Bank Great Rate Fixed Home Loan
1.69%
3.49%
$0
$0 p.a.
110%
$532.6
Requires a family member to act as guarantor.
Get one of the lowest rates on the market with this fixed rate mortgage and borrow more with help from a family guarantor. NSW, QLD and ACT residents only.
UBank UHomeLoan Variable Rate
2.34%
2.34%
$0
$0 p.a.
80%
$581.39
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Westpac Flexi First Option Home Loan
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
$577.55
A flexible and competitive variable rate loan from Westpac. This loan is available with a low deposit.
St.George Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
90%
$596.91
Borrowers can get this flexible and competitive variable loan with just a 10% deposit.
homeloans.com.au Low Rate Home Loan with Offset
2.59%
2.61%
$0
$0 p.a.
90%
$600.83
Save on interest with a free 100% offset account and buy your property with just a 10% deposit. This loan is not available for construction.
IMB Budget Home Loan
2.68%
2.74%
$449
$0 p.a.
95%
$607.92
NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate
2.28%
3.84%
$0
$395 p.a.
95%
$576.78
$2,000 refinance cashback
Enjoy a competitive rate with no application fee for this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
AMP Bank Professional Package Fixed Loan
1.99%
3.1%
$0
$0 p.a.
80%
$554.81
Get a low fixed rate package with no application or settlement fee. Available with a 20% deposit. Other fees and charges apply.
IMB Budget Home Loan
2.58%
2.64%
$449
$0 p.a.
80%
$600.05
A competitive variable rate for borrowers with 20% deposits saved. Available for NSW and ACT borrowers only.
Well Home Loans Balanced Variable
2.17%
2.2%
$250
$0 p.a.
80%
$568.39
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee.
ME Flexible Home Loan Fixed with Members Package
1.99%
3.33%
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80%
$554.81
Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.
Bank of Melbourne Basic Home Loan
2.49%
2.51%
$0
$0 p.a.
80%
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A low fee, low rate variable rate loan for home buyers. Requires at least a 20% deposit.
HSBC Fixed Rate Home Loan Package
1.88%
2.86%
$0
$390 p.a.
80%
$546.6
Lock in a low fixed rate for 2 years and buy your home with a 20% deposit. This loan also lets you make extra repayments.
IMB Fixed Rate Home Loan
1.89%
2.87%
$449
$6 monthly ($72 p.a.)
95%
$547.35
NSW and ACT customers only. Lock in a low fixed rate for two years. Available with a 5% deposit.
Heritage Bank Discount Variable Home Loan
2.59%
2.64%
$600
$0 p.a.
80%
$600.83
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
Well Home Loans Balanced Fixed Home Loan
2.04%
2.17%
$250
$0 p.a.
90%
$558.56
A low 3 year fixed rate for home buyers. Add a 100% offset account with a $10 monthly fee. Not available for construction purposes.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan
2.59%
2.6%
$0
$0 p.a.
110%
$600.83
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
2.28%
3.63%
$0
$395 p.a.
95%
$576.78
$2,000 refinance cashback
A two year fixed rate home loan with no application fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Well Home Loans Balanced Variable
2.52%
2.55%
$250
$0 p.a.
90%
$595.35
A very low variable interest rate for borrowers with a 10% deposit. Add a 100% offset account for $10 a month. Not available for construction purposes.
Bank of Melbourne Advantage Package Fixed Home Loan
1.94%
3.21%
$0
$395 p.a.
80%
$551.07
Lock in a competitive fixed rate for four years. Available with a 20% deposit.
St.George Basic Home Loan
2.49%
2.51%
$0
$0 p.a.
80%
$593.01
Competitive, flexible variable rate loan from St.George. Low fees and available with a 10% deposit.
BankSA Advantage Package Fixed Home Loan
1.89%
3.43%
$0
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$547.35
Get this competitive loan and fix your rate for the first two years. This is a package loan that lets you bundle a transaction account and credit card with the loan.
HSBC Home Value Loan
2.44%
2.45%
$0
$0 p.a.
80%
$589.12
Get a low interest variable rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
Bank of Melbourne Basic Home Loan
2.54%
2.56%
$0
$0 p.a.
90%
$596.91
Competitive variable rate home loan.
Newcastle Permanent Building Society Fixed Rate Home Loan
2.38%
3.72%
$595
$0 p.a.
90%
$584.48
$2,000 refinance cashback
Competitive fixed rate for home buyers.Available with a 10% deposit.$2,000 cashback for eligible refinancers borrowing $250,000 or more.
ME Basic Home Loan
2.58%
2.6%
$0
$0 p.a.
80%
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This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
BankSA Basic Home Loan
2.49%
2.51%
$0
$0 p.a.
80%
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This competitive, flexible variable rate loan requires a 20% deposit and has minimal fees.
St.George Fixed Rate Advantage Package
1.94%
3.21%
$0
$395 p.a.
80%
$551.07
This low fixed rate loan requires a 20% deposit. It's a package loan that lets you add a credit card and transaction account.
UBank UHomeLoan Fixed
1.99%
2.33%
$0
$0 p.a.
80%
$554.81
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
Newcastle Permanent Building Society Premium Plus Package Home Loan
2.94%
3.34%
$0
$395 p.a.
95%
$628.65
$2,000 refinance cashback
New borrowers or refinancers can get a discounted rate with this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
Suncorp Back to Basics Home Loan
2.59%
2.6%
$0
$0 p.a.
90%
$600.83
A competitive variable interest rate loan with low fees. The establishment fee is waived if you borrow $150,000 or more.
IMB Fixed Rate Home Loan
1.97%
2.81%
$449
$6 monthly ($72 p.a.)
95%
$553.31
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online. Available with a 10% deposit.
CUA Achieve Variable Home Loan
2.35%
2.4%
$600
$0 p.a.
95%
$582.16
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs. Eligible refinancers can get a $2,000 pre-paid credit card when they switch to CUA.
Newcastle Permanent Building Society Real Deal Home Loan
2.59%
2.63%
$595
$0 p.a.
80%
$600.83
$2,000 refinance cashback
$2,000 cashback for eligible refinancers borrowing $250,000 or more.
ME Flexible Home Loan With Member Package
2.59%
3.05%
$0
$395 p.a.
80%
$600.83
This flexible variable rate loan comes with a 100% offset account and redraw facility. Requires a 20% deposit.
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