In short: Beyond payslips and statements, most home loan files need a written statement from someone other than you: a gift letter from a parent, an employment letter from your boss, an accountant's declaration, a rental ledger or a statutory declaration about living arrangements. Each has required elements, and a letter missing one of them delays the file or gets the funds disallowed entirely.
This is where good applications quietly fall over. Everything else in a loan file is generated by a system, so it is either right or it is not. A letter is written by someone who has never seen a credit policy, usually in three lines. Below is what each document needs, who signs it and what the assessor looks for. We do not publish templates, because a template invites people to sign a statement they have not read.
The legal point about statutory declarations
Several of these are statutory declarations, not ordinary letters: a formal written statement signed before an authorised witness, declaring the contents are true. Knowingly making a false one is a criminal offence. Under the Commonwealth Statutory Declarations Act 1959 the maximum penalty is four years imprisonment. Under Victoria's Oaths and Affirmations Act 2018, making a statement in a statutory declaration you know to be untrue carries a fine of up to 600 penalty units, up to five years imprisonment, or both. The Department of Justice and Community Safety explains the process and who may witness one at justice.vic.gov.au/statdecs.
If a parent signs a declaration that money is a non-repayable gift and there is a side arrangement to pay it back, the declaration is false. Never sign one to make an application work. If the money is a loan, say so and we structure around a loan.
The quick reference table
| Document | Who signs it | What the assessor checks | Why it gets rejected |
|---|---|---|---|
| Gift letter or statutory declaration of gift | The giver (both, if a couple) | Money is non-repayable; giver has no claim over the property | Silent on repayment; no evidence of the giver's source of funds |
| Employment verification letter | HR or a manager who can be phoned back | Role, start date, employment basis, base salary, probation status | No letterhead; no direct contact number; silent on probation |
| Accountant's letter or declaration | A registered tax agent or CPA/CA member | Trading status, income, tax obligations current | Written by a bookkeeper; no membership number |
| Rental ledger or reference | The managing agent or a private landlord | Twelve months of rent paid on time, no arrears | A screenshot from an app; a reference from a relative |
| Living rent-free declaration | The property owner you live with | You pay no rent and are not expected to | Contradicted by rent-sized transfers on your statements |
| Explanation letter for a default | You, the applicant | A clear cause, a clear end, evidence it ended | Generic wording, no dates, no documents |
| Contract renewal letter | The employer or contracting entity | A stated expectation of work beyond the end date | Says renewal "may" happen, with no basis |
The gift letter
The one that most often stops a settlement. When part of your deposit comes from someone else, the lender must know whether it is money you own or money you owe. A gift adds to your equity; an undocumented family loan is a hidden liability that changes both your deposit and your servicing.
What it must establish
- The giver's full name and address, and relationship to you
- The exact amount, and the date it was or will be transferred
- A clear statement that the money is a gift and is not repayable, with no interest, conditions or repayment schedule
- A statement that the giver will have no legal or beneficial interest in the property and will not lodge a caveat
- The giver's signature and date, and for many lenders a witness
- Both signatures where the funds are a couple's joint money
What the assessor is checking
Two things: that the wording removes any repayment obligation, and that the giver had the money in the first place. The second half is missed constantly. Expect the giver's own source-of-funds evidence — a statement showing the money accumulating, or the sale, redraw or superannuation release it came from.
A gift the lender suspects is really a loan is the single most common reason deposit funds are disallowed. The tells are obvious from the assessor's chair: silence on repayment, a round loan-sized amount, or transfers back to the giver.
Overseas gifts
Requirements go up, not down. You need the transfer trail: the overseas statement showing the funds before they left, the transfer confirmation, and the credit into the Australian account, with amounts reconciling. Translations must be certified. See home loans for new migrants and foreign currency income.
Worked example: gift versus family loan on a $700,000 purchase
You have $45,000 saved. Your parents will contribute $70,000. The price is $700,000.
If it is a genuine, documented gift
- Deposit: $45,000 + $70,000 = $115,000
- Loan: $700,000 − $115,000 = $585,000
- LVR: $585,000 ÷ $700,000 = 83.6%, so LMI applies
- Repayment, for illustration at 6.00% p.a. over 30 years: about $3,507 a month
If it is really a family loan of $70,000 repaid at $600 a month
The lender treats $600 a month as an ongoing commitment, and may decline to count the borrowed funds as your deposit at all.
- The $600 is assessed at your rate plus the 3 percentage point APRA buffer, so at 9.00% p.a.
- $600 a month at 9.00% over 30 years supports roughly $74,600 of borrowing, so your maximum loan falls by about that much
- If the $70,000 is also excluded from the deposit, the deposit drops to $45,000, the loan needed rises to $655,000 and the LVR becomes 93.6%
That is the difference between approval and decline. Read how much deposit do I need and genuine savings explained. Some families genuinely intend repayment, and some lenders assess a documented family loan on stated terms. What does not work is calling it a gift on paper and a loan at the dinner table.
The employment verification letter
Requested when you are new in a role, on probation, casual, on contract, or where payslips do not explain the income. It must contain:
- Company letterhead, with ABN and business address
- Your full legal name, exactly as on the application
- Your position title and start date with that employer
- Your employment basis: permanent full-time, permanent part-time (with hours), casual, fixed-term or labour hire
- Whether you are on probation, and the date it ends
- Base salary or hourly rate, separate from overtime, bonuses, commissions and allowances
- For contracts, the end date and whether renewal is expected
- The signatory's name, position, direct phone number and email
What the assessor is checking: whether the income is likely to continue. A letter confirming a $110,000 salary that omits the six-month probation you started three weeks ago has not answered the question, and the assessor will find the probation another way. They also verify by phone. See probation and new job home loans and casual and contract income.
The contract renewal letter
Where a fixed-term contract ends within the assessment window, some lenders accept a letter from the employer confirming an intention to renew. It carries weight only if specific: the current end date, a statement that the role is ongoing and funded, and ideally a history of previous renewals.
The accountant's letter or declaration
Used for self-employed applicants, and central to low doc lending. It must contain:
- Firm letterhead, tax agent registration and professional body membership details
- How long they have acted for you and for the entity
- Confirmation the business is trading, the ABN and the trading structure
- The income figure confirmed, and the period it relates to
- For low doc: confirmation they have prepared or sighted the records, and that lodgements and tax obligations are up to date
- Signature, name, position and date
What the assessor is checking: that an independent, regulated professional with something to lose stands behind the income figure. Assessors discount letters from an internal bookkeeper, letters offering an opinion on affordability (not the accountant's call), and letters confirming income for a period the accountant has not worked on. See low doc loans explained and the self-employed home loan guide.
Ledgers, rent-free declarations and explanation letters
Rental ledger or rental reference
Where you lack the usual genuine savings, some lenders accept a rental history instead, on the logic that paying $600 a week on time for a year proves the same capacity. It needs the managing agent's ledger covering at least twelve continuous months, showing the rent, every payment, the paid-to date and any arrears. A private landlord can provide a reference with the same information plus corroborating bank statements. A reference from a relative you live with is not accepted, nor is a screenshot from a payments app.
Living rent-free declaration
Common where an applicant lives with parents. The lender needs a statement from the property owner confirming you live at the address, pay no rent and are not expected to, consistent with your statements: regular rent-sized transfers to the person who signed it end the conversation. Lenders still apply a minimum living expense benchmark. Read living expenses and HEM explained.
Explanation letters for defaults, arrears and employment gaps
Requested whenever the file contains something the numbers do not explain: a default, arrears, an employment gap, an unusual deposit. A good explanation has four parts:
- What happened, in one or two factual sentences, with dates
- Why it happened, without minimising it
- What changed so it will not recur
- Evidence that the event is closed
The fourth part separates a strong explanation from a weak one. An unevidenced letter saying a $2,400 telco default was a billing dispute is an assertion. The same letter attached to the paid-in-full confirmation and six months of clean statements is a resolved event. Assessors want a history they can explain in their own credit submission. See credit score and home loans.
Frequently asked questions
What must a gift letter for a home loan actually say?
It identifies the giver and their relationship to you, states the exact amount and date, confirms the money is a gift that is not repayable and carries no interest or conditions, and confirms the giver holds no interest in the property. It is signed and dated by the giver, often as a witnessed statutory declaration, and supported by evidence of where their money came from.
What should an employment letter for a home loan include?
Company letterhead with ABN, your full name and position, start date, employment basis, probation status and end date if applicable, base salary stated separately from overtime and bonuses, and the name, title and direct phone number of a contactable signatory.
Can I use a rental ledger instead of genuine savings?
Some lenders accept twelve continuous months of rental history in place of the usual three months of accumulated savings, on the basis that paying rent on time demonstrates the same capacity. It must come from a managing agent's ledger, or a landlord reference backed by bank statements, and it must be clean and unbroken.
Why did the lender ask for a letter explaining an old default?
Because the credit file shows an event the application does not explain, and an unexplained event is assessed at its worst reading. A short, dated, factual explanation, with evidence that the debt was paid and the cause resolved, lets the assessor write it into their credit submission and move on.
Talk to GNT Finance
If someone is helping with your deposit, if you are new in a job, or if something needs explaining, get the wording right before the application goes in rather than after it comes back. We tell each signatory what their document must contain and check the draft against that lender's policy before lodging. Start with the documents checklist and the checklist generator.
Book a free consultation or call 0426 403 703.
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.