In short: Lenders accept a gifted deposit from parents or close family if it is documented with a signed gift letter confirming the money is non-repayable, the funds are traceable in your account, and, for most lenders, you can still show around 5% of the price as genuine savings held for three months or a solid rental history. Gifts from overseas need extra paperwork proving the source of the funds.
Key takeaways
- A gift letter must state the amount, the giver, the relationship, and that the money is a gift with no repayment expected.
- Most lenders still want genuine savings of about 5% held for three months, or will substitute a 12-month rental history.
- Funds must be in your account and traceable; cash deposited over the counter is a problem.
- Overseas gifts need the sender's bank statements, transfer records and sometimes evidence of how the giver came by the money.
- If the money is actually a loan, say so. The lender will count it as a liability, but an undisclosed loan is worse.
A large share of first home buyers in Melbourne's north get help from family, and among our Nepali and South Asian clients it is close to the norm. Lenders are comfortable with gifts. What they are not comfortable with is money that appears without explanation, or "gifts" that are really loans. This post sets out exactly what an assessor needs to see so the gift helps your application rather than delaying it.
What the lender is worried about
Three things. First, whether the money will still be there at settlement (a "gift" that a parent can demand back is not a deposit). Second, whether you can manage money yourself, which is what the genuine savings rule tests. Third, since the anti-money-laundering rules, whether the funds have a legitimate source. Every document below answers one of those three questions.
The gift letter
There is no legal form, but lenders expect a signed letter or statutory declaration with the following. Missing any of these is the most common reason gift files get sent back.
- Full name, address and contact details of the giver.
- Your full name and the giver's relationship to you.
- The exact amount of the gift in Australian dollars.
- A statement that the money is an unconditional gift, not a loan, and no repayment is expected.
- A statement that the giver has no interest in the property.
- Confirmation the giver is not borrowing the money to give it.
- Signature and date, witnessed if the lender requires a statutory declaration.
Some lenders also ask for the giver's bank statement showing the funds leaving their account, so the trail from their account to yours is complete.
Genuine savings still matters
A gift solves the deposit; it does not always solve the genuine savings test. Most lenders want to see around 5% of the purchase price that you saved yourself, held in your account for at least three months. The reasoning is that a borrower who has demonstrated saving is a lower risk than one who has not. Our guide genuine savings explained covers the detail and the exceptions.
On a $650,000 purchase in Craigieburn, 5% is $32,500. If your parents gift $100,000 and you have $32,500 of your own that has sat in your account since June, you meet both tests. If you have $5,000 of your own and $127,500 from parents, some lenders will decline and others will accept a 12-month history of rent paid on time as a substitute for savings. Knowing which is which is part of what we do.
A gift that has been in your account for three months or more is treated by many lenders as genuine savings, so an early gift is worth more than a late one. If your parents are planning to help, ask them to transfer it as soon as they are able rather than the week before you find a home.
Worked example
| Item | Amount |
|---|---|
| Purchase price (established house, first home buyer) | $650,000 |
| Stamp duty (first home buyer concession) | $11,357 |
| Other upfront costs (conveyancing, fees, inspection) | about $3,500 |
| Gift from parents | $80,000 |
| Own savings held over three months | $35,000 |
| Total funds available | $115,000 |
| Less duty and costs | $14,857 |
| Available for deposit | $100,143 |
| Loan required | $549,857 |
| LVR | about 84.6% |
At 84.6% LVR this buyer pays LMI unless eligible for the First Home Guarantee, which allows a 5% deposit with no LMI and, at the time of writing, has no income cap. With the Guarantee the buyer could keep a larger cash buffer after settlement instead of putting everything into the deposit. Run the numbers in the LMI calculator and upfront costs calculator.
Gifts from overseas
Money arriving from Nepal, India, the UK or anywhere else is acceptable to most lenders, but the source-of-funds requirement is more demanding. Expect to provide:
- The international transfer receipts showing sender, recipient, amount and date.
- The giver's overseas bank statements showing the money before it was sent.
- Evidence of how the giver accumulated the funds if the amount is large relative to their income: a property sale contract, business accounts, or a long savings history.
- Currency conversion records, so the AUD amount in your account matches the amount sent.
- The gift letter, sometimes notarised in the giver's country.
- Evidence of relationship, such as birth certificates or a family document, if names differ.
Some countries restrict how much money residents can send overseas or require approvals before large transfers, which can slow the process by weeks. Start the transfer early and keep every piece of paper. Cash carried into Australia and deposited is very difficult to accept because there is no trail. If you are a recent arrival, the home loans for new migrants guide covers the other documentation you will need, and our visa holder loans page explains lender policy for temporary residents.
Gift versus loan versus guarantee
| Arrangement | How the lender treats it | Effect |
|---|---|---|
| Unconditional gift | Counted as your funds once documented | Reduces loan, may avoid LMI |
| Family loan | Counted as a liability with a repayment | Reduces borrowing power |
| Guarantor security | Parent's property secures part of the loan | Avoids LMI, no cash changes hands |
If parents want their money back eventually, a formal family loan or a guarantor loan is the honest structure. A guarantee has serious consequences for the parent, set out in guarantor legal responsibilities, so the whole family should understand it before signing. Where a partner's family is contributing, think about how the property will be owned; joint tenants vs tenants in common explains the options and buying property with a partner covers protecting a contribution.
Tax and pension considerations for the giver
Australia has no gift tax, and a genuine gift is not assessable income for you; the ATO's guidance on gifts confirms the position. If the giver receives an Australian age pension, large gifts can affect their entitlement under Services Australia's gifting rules, so they should check before transferring. The MoneySmart guide to helping family buy is a plain-English starting point for parents.
Frequently asked questions
Can my whole deposit be a gift?
With some lenders, yes, particularly if you have a 12-month rental history paid on time or the gift has sat in your account for three months or more. Others insist on 5% of your own savings regardless. It is a lender policy question, and matching you to the right policy is the job of your broker.
Does the gift letter need to be a statutory declaration?
Some lenders accept a signed letter; others require a statutory declaration witnessed by an authorised person. Ask before drafting it so it is done once. If the giver is overseas, check whether the lender accepts a document witnessed in that country or needs it notarised.
Can a friend or sibling gift a deposit?
Most lenders accept gifts from immediate family, which usually includes parents, grandparents, siblings and sometimes in-laws. Gifts from friends or distant relatives are harder, because the lender questions why someone with no family tie would give money unconditionally. If that is your situation, talk to us first.
What if my parents want to be on the title?
Then it is not a gift, it is a co-purchase, and the lender will assess your parents as borrowers with everything that implies for their own finances and tax. It also affects stamp duty concessions and the First Home Owner Grant, which require all buyers to be eligible. See buying property with a partner for the ownership structures.
Talk to GNT Finance
We prepare gift documentation for clients every week, including overseas transfers, and we know which lenders are flexible on genuine savings. Book a free consultation or call Gorakh Timilsina on 0426 403 703, in English, Nepali or Hindi. There is no cost to you for our home-loan service in most cases.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.