With deposits a major hurdle, more parents are helping their kids buy. Industry surveys have long suggested the "bank of mum and dad" is one of Australia's biggest sources of deposit help. If family is gifting you money, here's how lenders treat it.
What lenders need
A gift letter
A signed statutory declaration or gift letter from the giver, stating:
- The amount
- That it's a gift, not a loan
- That it doesn't need to be repaid
- That the giver has no interest in the property
Evidence of the funds
Bank statements showing the money transferred to you, and sometimes the giver's statements showing where it came from.
Genuine savings
If you're borrowing more than 90% of the property value, many lenders want at least 5% of the price to be genuine savings: money you've saved yourself over three months or more.
Some lenders accept a gift as genuine savings if it's been in your account for three months. Others don't count gifts at all toward genuine savings.
Under the 5% Deposit Scheme, policies on gifted deposits vary between participating lenders.
Gift vs loan
If the money must be repaid, it's a loan, and the lender will count the repayments against your borrowing power. Don't describe a loan as a gift. That's misrepresentation and can cause serious problems.
Gift vs family guarantee
A family guarantee is different. Instead of giving cash, a family member uses equity in their home to guarantee part of your loan. No money changes hands, but their property is at risk if you default. See our guide to guarantor loans.
Protecting the gift
Parents sometimes worry about the gift if their child's relationship breaks down. Options include:
- A binding financial agreement between the couple
- Documenting the gift as a loan with a formal agreement (which affects borrowing power)
- Being on the title (which affects first home buyer concessions)
Get legal advice before choosing.
Tax
Australia doesn't have a gift tax. But the giver should consider how a large gift affects their own finances, including any pension entitlements under Centrelink's gifting rules.
Frequently asked questions
How much can my parents gift me?
There's no limit from a lending perspective. Centrelink gifting rules may affect parents receiving the pension.
Can the gift come from overseas?
Yes, with documentation of the transfer.
Can my friend gift me a deposit?
Some lenders only accept gifts from immediate family. Policies vary.
Getting help from family? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654. We'll make sure the gift is documented the way your lender needs.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
