A growing number of first home buyers get part of their deposit from a parent or another family member. Lenders are comfortable with that, but they treat gifted money differently to savings you have built up yourself, and getting the paperwork wrong can slow down or derail an approval that would otherwise sail through.
What Counts as a Genuine Gift, Not a Loan
Lenders want written confirmation that the money is a genuine, unconditional gift, meaning there is no expectation it will ever be repaid and no security interest taken over the property in return. This usually takes the form of a signed gift letter from whoever is giving the money, stating the amount, the date it was or will be transferred, and the relationship to the applicant.
If the money is actually a loan you intend to repay, even informally between family, that changes the assessment entirely. A lender that becomes aware of a repayment arrangement will treat it as a liability like any other debt, which reduces how much you can borrow rather than simply adding to your deposit.
How Much of Your Deposit Can Be a Gift
Policy varies by lender here. Some lenders will accept a fully gifted deposit for eligible applicants, while others still expect to see genuine savings, typically at least 5% of the purchase price, held in your own name for three months or longer, even if the rest comes as a gift. First Home Owner Grants generally do not count toward that genuine savings requirement at most lenders, so it is worth checking early rather than assuming a grant fills the gap. Where a lender’s savings rule is not met, some will still proceed with a larger deposit overall or with lenders mortgage insurance covering the gap, so a gifted deposit that falls short of one lender’s rule does not automatically rule out an approval elsewhere.
This is one of the areas where which lender you apply with matters as much as your own financial position, since the same deposit mix can be accepted at one lender and knocked back at another.
Does a Gifted Deposit Affect How Much I Can Borrow?
A genuine gift, correctly documented, does not reduce your borrowing power the way a loan would. Your own income and expenses are still assessed independently to confirm you can service the mortgage on your side. What a lender will usually want to understand is why the gift was given, largely to confirm it genuinely is not repayable, rather than to reduce what you are approved for.
The Paperwork You Will Need
Beyond the gift letter itself, expect to provide bank statements showing the transfer landing in your account, and in some cases a statutory declaration from the person giving the gift. Lenders are checking two things: that the money is legitimately theirs to give, and that there is no undisclosed arrangement to repay it.
Getting this sorted before you apply, rather than scrambling for it once your file is already in assessment, is one of the simplest ways to avoid delays. A broker who knows a given lender’s exact documentation requirements can also save you from resubmitting the same paperwork twice in a slightly different format.
When to Start the Conversation With Family
Deposit gifts work best when they are planned well before you start house hunting, not arranged in a rush once you have found a property. Lenders generally want to see the funds sitting in your account for a reasonable period before settlement, not landing the week before you submit your application, since a large, unexplained deposit can slow down assessment while the lender asks questions about its source.
Talking to a broker early, before the gift is even transferred, means the paperwork can be prepared in the format a specific lender wants from the outset, rather than being reshaped after the fact.
A Gifted Deposit Is Not the Same as a Guarantor Loan
It is worth separating a cash gift from a guarantor arrangement, where a family member uses equity in their own property as additional security instead of handing over money. A guarantor structure can reduce or remove the need for lenders mortgage insurance altogether, while a gift simply adds to your cash deposit. Which one suits your situation depends on whether your family member has spare cash to give or equity to offer instead, and what each option means for their own finances if something goes wrong. It is also possible to combine the two, a smaller cash gift alongside a partial guarantee, if that fits the family’s overall financial position better than committing fully to one option.
Key Takeaways
- A gifted deposit needs a signed letter confirming the money is a genuine, unconditional gift with no expectation of repayment.
- If the money is really a loan you intend to repay, a lender will treat it as a liability, which reduces how much you can borrow.
- Genuine savings requirements vary by lender, some still expect at least 5% of the purchase price held in your own name for three months or more.
- First Home Owner Grants generally do not count toward a lender’s genuine savings requirement.
- A gifted deposit is different to a guarantor arrangement, which uses a family member’s property equity as security instead of cash.
- Sorting the gift letter and bank statements before you apply, rather than after, is one of the simplest ways to avoid delays.