Last Updated: 22nd January, 2018

Home Loan Using A Gifted Deposit

Published by Otto Dargan on June 19, 2014

Are you looking to a buy a new home? What if you don’t have any savings? Most banks require a 5% deposit to put towards the purchase price before they will lend to you.

In the past, the banks had very restrictive genuine savings policies and would only approve individuals where they could evidence savings made in a bank account for three to six months.

Where a person could provide genuine savings, the banks knew that they were lending to a responsible borrower who could manage their finances and afford the loan.

How has the policy changed?

You can now borrow up to 95% with no genuine savings! This means that where someone is willing to gift you the deposit, you will be able to borrow up to 95% of the property value.

Apply today! Call us on 1300 889 743 or enquire online. Our mortgage brokers are specialist in no genuine savings lending and know which banks you will qualify with.

Approval criteria

If your parents are gifting you a deposit to put towards a loan then it must be a gift and it cannot be a loan. Usually the banks require parents to evidence that the money is a gift and not a loan that needs to be repaid. Providing the banks with a gift letter that is signed by your parents will usually suffice.

The letter must state that the gift is non-refundable and will not be repaid. Some lenders may have additional requirements, including the completion of a statutory declaration form or on the condition that the funds be in the account. It just depends which lender you apply with.

What if my parents lend me the deposit?

Most lenders will not allow you to have a borrowed deposit. Most but not all!

Some lenders will approve your application if your deposit is a loan from your parents. They will make sure that you can afford the repayments to your parents along with the repayments on the new loan that you are seeking.

Alternatively, your parents may ask you to increase your home loan to repay the loan from them at a later date. In this case there may not be regular repayments to your parents or interest charged by them. Some of our banks will allow you to apply for a mortgage increase once your property has gone up in value so that your mum and dad can be repaid.

Will I get good interest rates?

Although this is a no genuine savings loan product, most lenders still offer the same competitive interest rates on these loan types. This means that you can borrow up to 95% of the property value with a 5% deposit, supplied by your parents as a gift, and still get great rates!

For a competitive interest rate, speak to us on 1300 889 743 or enquire online today. We will ensure that you get a great loan package!

What about LMI?

You may also be entitled to capitalise the Lenders Mortgage Insurance (LMI). This means that you will actually be entitled to borrow 98% of the purchase price so that you can afford to pay the LMI premium. Then you will have the 95% to put towards the house.

Who can I receive a gift from?

Whilst many people believe that a gifted deposit can come from anyone, the banks have very strict lending criteria and, as such, will only accept the deposit if it has come from parents.

Often your parents will have some money that they may have acquired through savings, the sale of assets or an inheritance from their parents. They may then choose to gift this to you to put towards your deposit.

If members of your immediate family provide you with the gift, some banks will accept this on case-by-case basis.

Does this include extended family?

Where someone in your extended family is gifting you the deposit, the banks will need to assess the closeness of your relationship and you may be required to explain your situation to them.

For example, if an aunt wants to gift you some money, the banks usually like to see that you have lived with this person for extended periods of time or are otherwise close.

If you have a strong relationship with your grandparents, they may be able to provide you with a gift, especially if they are selling their property, assets and shares and perhaps moving into a retirement village.

Who can’t I receive a gift from?

If your friends, employer or any other third party offers you a gift, most banks will not accept it as a deposit.

This is because lenders are concerned about the risk of fraud. It is quite possible that this person may have lent you the money to put toward a deposit. Therefore, it is not a gift, it is a loan. This issue cannot be overcome by signing a statutory declaration or providing the lender with a gift letter.

However, we always endeavour to find a solution to your problem! If this is the case for your situation, please talk to us on 1300 889 743 and we will see if there is a lender who will accept it.

First home buyers and parents

When you’re just starting out in the property market and buying your first home, your parents may offer to help you out with a deposit.

In cases where your parents do not have the funds to provide you with a deposit, they may wish to guarantee your loan by using their property as security.This is known as a guarantor loan

With a guarantor loan, you may be entitled to borrow 100% of the property value. This means that you do not even need a deposit!

Some parents do not have the funds to provide the entire deposit so some parents will contribute 2.5% of the deposit instead.

For example, if you have found a place that is selling for $400,000, you will have to provide at least a $20,000 deposit (5% of the property value).

This can be quite a large amount so some parents will provide their children with $10,000 and the other $10,000 may be the proceeds of the sale of an asset such as a car, inheritance from grandparents, commission or bonus income, or any income source that is commonly accepted by the banks.

Get a loan using a gift deposit today!

If you want to borrow up to 95% of the property value using a gift from your parents, please call us on 1300 889 743 or enquire online. Our specialist mortgage brokers are experts in no genuine savings and know which banks will accept your gifted deposit.

labelCategory: Policy Changes