First home buyers
Using a gifted deposit home loan in Australia
A gifted deposit home loan lets family gift money for your house deposit. Learn how lenders treat gifts, gift letters and LMI, and what to check first.
Yes, you can usually use gift money for a house deposit, and a gifted deposit home loan is simply a home loan where some or all of your deposit comes from a family gift rather than your own savings. Many parents help their children into a first home this way. Whether a lender accepts the gift, and on what terms, depends on your circumstances and the lender’s criteria. This guide explains how gifted deposits work, what lenders tend to ask for, and the questions worth sorting out before you apply.
How a gifted deposit home loan works
A gifted deposit is money given to you, often by parents, to put towards the purchase price of a home. The key word is “gift”. A genuine gift is money you do not have to pay back. That distinction matters to lenders, because a loan from a family member is a debt, and a debt changes how much you can comfortably afford to repay.
Gift money for a house deposit can sit alongside your own savings. For example, you might have saved part of the deposit yourself and have a parent top up the rest. It can also cover related costs such as stamp duty, which is a one-off state government property-transfer tax that you typically need to pay within 30 days of settlement.
How a gifted deposit affects your loan
A bigger deposit, whether saved or gifted, lowers how much you need to borrow. Lenders look at your loan to value ratio, or LVR, which is the amount of a loan as a percentage of the value of the property it is used to buy. You work it out by dividing the loan amount by the property value. Moneysmart gives a clear worked example: a 450,000 dollar loan on a 600,000 dollar home is a 75 per cent LVR.
LVR matters because of lenders mortgage insurance, or LMI. LMI is usually a one-off cost, payable when the amount you borrow is more than 80 per cent of the property value. It protects the lender if you cannot repay the loan, and it does not benefit you. A common savings goal is a deposit of 20 per cent of the purchase price plus enough to cover buying costs, because a 20 per cent deposit can help you avoid paying LMI. A gifted deposit that lifts your total deposit toward 20 per cent may reduce or remove LMI, though whether it does depends on the lender and your situation.
Where a 20 per cent deposit is out of reach, some lenders may accept a deposit as little as 5 per cent. Eligible first home buyers may also be able to buy with a smaller deposit under the Australian Government five per cent deposit scheme, which can help them avoid LMI. A gift can help you reach the deposit a particular path requires. For more on that pathway, see Buying with 5 percent deposit.
To see how a larger deposit could change your numbers, try the borrowing power calculator and adjust the deposit figure.
Borrowing power calculator
Open the calculator to run your own numbers.
What lenders usually ask for
Lenders treat gifted funds differently from money you have saved yourself, so most will want to confirm a few things. Requirements vary by lender, but the common ones are below.
A signed gift letter. Most lenders ask the person giving the money to sign a short statement confirming the amount, that it is a genuine gift, and that it does not have to be repaid. This is how the lender separates a gift from a loan.
Proof of the source of funds. The lender may ask where the money came from, in line with their responsible lending and anti-money-laundering checks. Clear records help here.
A view on genuine savings. Some lenders want to see that part of your deposit is your own savings, held over a period, on top of the gift. Lenders look at your savings history because regular saving shows you can budget and commit to repayments, and even small consistent deposits into a savings account make a difference. How much genuine savings a lender wants, if any, depends on the lender and the loan.
Because each lender sets its own rules, the same gift can be treated differently from one lender to the next. This is one area where guidance on which lenders suit a gifted deposit can save time.
Gifted deposit versus a guarantor
A gift is not the only way family can help. Some home buyers have a family member act as a guarantor, someone who uses their own home or savings to help secure the loan. The two are different.
| Feature | Gifted deposit | Guarantor |
|---|---|---|
| What the family member gives | A sum of money toward your deposit | Their own home or savings as security behind your loan |
| Ongoing obligation | Usually none once the gift letter is signed | Ongoing risk while the guarantee is in place |
| Their exposure | Limited to the amount they give | Their assets are tied to your loan |
| Effect on your deposit | Adds to the deposit you put in | May let you borrow with little or no deposit |
With a gifted deposit, the family member hands over money and, once the gift letter is signed, usually has no further obligation. With a guarantor, the family member’s own property or savings sit behind your loan, so they carry ongoing risk if you cannot repay. A gift keeps the helper’s exposure to the amount they give. A guarantor arrangement can let you borrow with little or no deposit but ties a loved one’s assets to your loan. Which suits you depends on your circumstances, how much is being contributed, and how comfortable the family member is with risk.
Is gift money for a house deposit taxed
Australia does not have a separate gift tax on an ordinary personal gift between family members, so receiving gift money for a house deposit is generally not treated as income you earn. Tax can still be relevant in some situations, for example if the money was sitting in an investment, or if a person receiving a pension or benefit gifts a large sum. Tax depends on individual circumstances, so anyone giving or receiving a large gift should get their own advice from a registered tax professional or the Australian Taxation Office before acting.
Steps to use a gifted deposit
- Confirm the gift is genuine. Agree with the giver that the money does not have to be repaid, because that is what makes it a gift rather than a loan.
- Work out your deposit and LVR. Add the gift to any savings, then check where that puts your LVR and whether LMI is likely to apply.
- Get the gift letter ready. Ask the giver to sign a short statement confirming the amount and that it is non-repayable. Keep records of where the money came from.
- Check the lender’s rules. Confirm whether the lender wants any genuine savings of your own alongside the gift, and how it treats gifted funds.
- Apply with the full picture. Submit the gift letter, your savings evidence, and the source-of-funds records together so the lender can assess the application cleanly.
Talk it through with Finance Lab
A gifted deposit can open the door to a first home sooner, but the right lender and structure depend on your full picture. The team at Finance Lab can help you work through your options, explain what a particular lender will ask for, and line up the paperwork before you apply. Get in touch with the team at Finance Lab to talk it through.
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