Inheritance As A Deposit
You don’t need genuine savings!
Have you recently received an inheritance following the death of a loved one?
If you’re looking to get your foot into the property market, there are some banks that will accept inheritance as a deposit for a home loan.
What are the requirements, how much can you borrow and do you still need to show your genuine savings?
How much can I borrow?
As long as you can show that the inheritance is non-refundable:
- You can borrow up to 95% of the property value with some lenders.
- You can get the same interest rates as a borrower who saved a deposit themselves.
- Lenders Mortgage Insurance (LMI) will apply for home loans over 80% LVR (Loan To Value Ratio) however you avoid paying this cost upfront by capitalising the amount.
- You still need to meet all other standard qualifying criteria including a strong enough income to afford the loan, minimal debt and a clear credit history.
Using inheritance as a deposit is a no deposit solution that can help you get into the property market much sooner.
Speak with one of our specialist mortgage brokers by calling 1300 889 743 or by filling in our free assessment form today.
How do I qualify?
The main eligibility requirement is that the inheritance is a non-refundable payment.
To prove this, you typically need to provide a letter from the executor confirming the amount of the inheritance and when it was distributed to you as the beneficiary.
You may also be asked to provide a copy of the Will and Grant of Probate. Executors and solicitors are good at keeping records so this shouldn’t be too difficult!
Secondly, you’ll need a bank statement showing the funds deposited into your bank account or an account that’s in the name of the executor or trustee of the deceased estate.
If the inheritance is held in the name of the trust, the letter should also state that you are legally able to access the funds prior to settlement.
The bank statement should match the amount and date specified in the executor’s letter.
Like a gifted deposit home loan, some lenders require you to hold the funds in a bank account for at least 3 months before you can apply for a mortgage. However, this isn’t a requirement for all lenders.
Who can I receive inheritance from?
There isn’t a hard and fast rule with this but immediate family members and close relatives is a basic rule of thumb. This includes:
- Spouse or de facto partner
Like a gifted deposit, banks are mainly concerned about the closeness of the relationship that you had with the deceased.
The reason is that the closer the relationship, the less likely that the inheritance will be contested.
Of course, this isn’t always the case when it comes to inheritance since emotions can run high when a family member dies.
That’s why getting a signed letter from the executor or trustee of the estate is crucial.
Can I buy an investment property?
Yes! As long as the inheritance is covering 20% of the purchase price, you can still buy an investment property.
Can I still get the first home buyer’s grant?
Yes, the First Home Owner’s Grant (FHOG) is still available to you if you’re a first home buyer and buying a new property.
Don’t forget about it!
Depending on the state you live and how much the property is worth, you could be eligible for a $15,000 grant.
You can use the funds to help cover the costs of buying property including stamp duty, solicitors fees and registration costs.
Depending on how much you’re borrowing, the FHOG is sometimes enough to cover these costs in full.
If you’re capitalising the cost of LMI as well, that means you don’t need to pay anything upfront for your mortgage.
Alternatively, if you’re inheritance is enough to cover these cost, you can these extra funds in your pocket for moving costs or to buy furniture, make a lump sum repayments on a variable rate mortgage, or even go on a holiday. It’s up to you!
How does the inheritance process work?
Property and assets belonging to the deceased are known as their estate.
An estate can be divided up even if your parents or relative didn’t have a will in place, there has been no executor appointed or the appointed is not willing (for whatever reason) to complete their responsibilities.
In lieu of an executor, the court will appoint an administrator.
The executor or administrator will distribute the estate as per the will or, if there is no last will and testament, via your relevant state’s intestacy rules.
This will be executed as part of probate after the assets of the deceased’s estate have been collected and their remaining debts and liabilities have been paid out.
Don’t have inheritance or a gift as a deposit?
Are you struggling to save up a deposit to buy a property?
Don’t have an inheritance or your parents are unable to provide you with an “early” inheritance by way of a gifted deposit?
Your parents or a close relative can still help you if they’re in a position to act as guarantor on your home loan.
The good news is that:
- You don’t need a deposit.
- You don’t need genuine savings.
- You can borrow 100% of the purchase price plus the costs of completing the purchase.
Speak to a no deposit expert
We’re specialists in helping Australians who don’t have a deposit to buy the property of their dreams.
Please call us on 1300 889 743 or fill in our free assessment form to discover if you’re eligible to use your inheritance as a deposit.