Can You Use Gifted Money for a Home Loan Deposit?

Yes, many Australian lenders will accept gifted money towards a home loan deposit, but policies differ between lenders. Most want the gift documented, and many also want to see some savings you have built up yourself, so it pays to ask before the money lands in your account.

This is general information only, not financial, legal or tax advice.

Why lenders care where a deposit came from

A lender is not just checking that the money exists. It is trying to work out whether you can carry a mortgage for decades. Your deposit is one of the few things that shows how you handle money over time. Moneysmart makes the same point, noting that regular saving shows you can budget and commit to repayments.

There is also a legal side. Under ASIC’s Regulatory Guide 209 on responsible lending, a lender has to make reasonable inquiries about your financial situation and take reasonable steps to verify it. The guide says it is not enough to simply rely on other people providing true information. A large, undocumented transfer into your account is exactly the kind of thing that prompts questions.

Gift versus loan: the distinction that matters

From a lender’s point of view, the big question is whether the money is a genuine gift or a loan from family in disguise. A loan from relatives is a debt, and it changes what you can afford to repay. In my experience, lenders commonly ask for a signed letter from the giver confirming that the money is a gift, that it does not have to be repaid, and that the giver will not have any interest in the property. The exact wording and who can give a gift differ between lenders, so ask yours for its requirements.

What “genuine savings” means, and why policies differ

Many lenders ask for a portion of the deposit to be genuine savings, meaning money you have accumulated yourself rather than received as a lump sum. How much, over what period, and whether a gift can count towards it all depend on the lender and the loan. I will not give you a single figure here, because I cannot point to a public rule that applies across the industry. Policies differ between lenders; check with yours.

Some things that often count as evidence of saving habits include regular transfers into a savings account, a history of rent paid on time, and a stable account balance that grows over months. Ask each lender how they treat these.

How deposit size affects the loan

Whether the deposit is gifted or saved, its size matters. Moneysmart says some lenders may accept a deposit as small as 5%, and that if your loan-to-value ratio (LVR) is above 80% you may need to pay lenders mortgage insurance (LMI). LMI protects the lender, not you. A gift that lifts your deposit closer to 20% could reduce or remove that cost, which is one reason family gifts can be so useful.

Gift or guarantee: they are not the same thing

Some families help by going guarantor instead of giving cash. This is a very different commitment. Moneysmart’s guide to going guarantor explains that a guarantor agrees to repay the loan if the borrower cannot, and may have to repay the whole debt plus interest. The same page notes that if you are uncomfortable guaranteeing, you can help in other ways, such as contributing money towards a house deposit. I cover the guarantor side in Guarantor Home Loans: What Family Really Signs Up For.

Practical tips before the money moves

• Ask the lender or broker what they need for gifted funds before the gift is transferred, not after.
• Keep the transfer traceable. A direct bank transfer with a clear description is easier to evidence than cash.
• Do not mix the gift with an informal promise to pay it back. If repayment is expected, tell the lender, because it will be treated as a debt.
• If you can, keep adding your own savings alongside the gift so there is a visible history.
• Think about the giver too. Gifts can have tax, pension or family-law consequences for them, and those are questions for an accountant or solicitor.

What to do next

• Ask two or three lenders, or a broker, for their written requirements on gifted deposits and genuine savings.
• Agree with the giver, in writing, that the money is a gift and not a loan.
• Check your deposit against the 80% LVR line to see whether LMI is likely.
• Collect statements showing your own savings history.
• Get independent advice if the amounts are large or family circumstances are complicated.

Related Reading

• Guarantor Home Loans: What Family Really Signs Up For
• Home Lending & Property Glossary
• How to Buy a House in Australia: A First-Timer’s Step-by-Step Guide

Written by Michael Wignall, who’s spent 30+ years in banking and home lending across the ACT, Illawarra, and Riverina regions of NSW.

More on this topic is collected in the Finance Strategies for Australians hub.

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Written by Michael Wignall, Lending Area Manager with 30+ years in banking and home lending across the ACT, Illawarra, and Riverina. Got a question or an idea for a post? Get in touch.