Can I use a gift from my parents to apply for a home loan?

Any general questions you might have in regards to loans and finance.
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Bruce
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Joined: Thu Jun 20, 2013 6:21 pm

Can I use a gift from my parents to apply for a home loan?

Post by Bruce »

Hi, I have found a beautiful house which is selling at a pretty reasonable price but I don’t have any savings of myself to apply for a home loan. I don’t know if I can show this as a saving but I was given $15,000 a few months ago by my parents and it has been in my account ever since.

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Otto Dargan
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Re: Can I use a gift from my parents to apply for a home loa

Post by Otto Dargan »

Hi and welcome to the forums Bruce,

Most lenders will look at your deposits and require you to have at least 5% deposit to put towards the purchase price. Lenders use to have very strict genuine savings policies and would only approve loans of individuals who could provide evidence that the savings were made in a bank account for three to six months.

Lenders have changed their policy and when someone is willing to gift you the deposit, you will be able to borrow up to 95% of the property value. This means that you can now borrow up to 95% with no genuine savings.

You would still be required to meet standard lending criteria including your employment, credit history, serviceability and proof of your income. The amount you can borrow will depend on your overall situation:
  • 90% home loans: Three of our lenders are willing to lend out 90% of the purchase price irrespective of the source of your deposit.
  • 95% home loans: One of our lenders can approve a home loan for up to 95% of the purchase price with no genuine savings.
With non-genuine savings you may also be entitled to capitalise the Lenders Mortgage Insurance (LMI) which means that you may be able to borrow 98% of the purchase price so that you can afford to pay the LMI premium. As a result, you will have the 95% to put towards the house.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Bruce
Posts: 34
Joined: Thu Jun 20, 2013 6:21 pm

Re: Can I use a gift from my parents to apply for a home loa

Post by Bruce »

Hmm..okay, sounds good. BTW is there a particular criteria I must meet in order to get approved?

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Otto Dargan
Mortgage Specialist
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Can I use a gift from my parents to apply for a home loa

Post by Otto Dargan »

Hi Bruce,

The lender must be sure that the money your parents have given you is a gift and not a loan. For this lenders will parents to evidence that the money is a gift and not a loan that needs to be repaid and this can be usually done by providing them with a gift letter signed by your parents. This is a letter confirming that they are giving you a gift for you to use as a deposit to buy a property.

The letter should state that the gift is non-refundable and will not be repaid. Additional evidence may be required by some lenders which includes the completion of a statutory declaration form or on the condition that the funds are in the account.

Lenders may also need to confirm the source of their borrower’s deposits to make sure that they are not borrowing the deposit off credit cards or a personal loan.

The format of the letter must look something like this:

This is a normal letter template as used by most lenders. If your lender has specifically asked for a statutory declaration then please use the 2nd template.

1/1/2010

To Whom It May Concern:

Re: John Smith

I confirm that I am giving my son John Smith an unconditional gift of $50,000 for him to use to buy a property. This gift is not repayable or refundable.

Should you require any additional information please do not hesitate to contact me on 02 0000 0000.

Regards,

(SIGN)

Adam Smith
1 George St Sydney NSW 2000


If you would like to see some other template then you can check it out in our website. We can also be reached on 1300 889 743 or you can fill in our free assessment form to see if you qualify for a loan or not.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Bruce
Posts: 34
Joined: Thu Jun 20, 2013 6:21 pm

Re: Can I use a gift from my parents to apply for a home loa

Post by Bruce »

Okay, criteria noted! I have filled in your form and I am waiting to hear back from you :)

burGer
Posts: 34
Joined: Thu Jun 27, 2013 9:18 pm

Re: Can I use a gift from my parents to apply for a home loa

Post by burGer »

Is there a restriction on who I can receive a gift from to show as a deposit to apply for a home loan?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Can I use a gift from my parents to apply for a home loa

Post by Otto Dargan »

Hi burGer,

Lenders have very strict lending criteria and this is why they will only accept the deposit if it has come from the parents. However if members of your immediate family provide you with the gift then some lenders will accept this on case-by-case basis. In cases 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, let’s say if your uncle has given you some money as a gift then lenders will need evidence to show 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 and if they are selling their property, assets and shares and perhaps moving into a retirement village then they may be able to provide you with a gift.
However if your friends, employer or any other third party offers you a gift then most lenders will not accept it as a deposit.

The reason why lenders will do this is because they are concerned about the risk of fraud and fear that the money you get is a loan and not a gift.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

burGer
Posts: 34
Joined: Thu Jun 27, 2013 9:18 pm

Re: Can I use a gift from my parents to apply for a home loa

Post by burGer »

Oh okay! I didn’t know this. Thanks Otto for clearing up my confusion :)

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