In short, the answer is yes. You can apply for a home loan, to purchase a property, with a gifted deposit.

Loans with non-genuine savings are scrutinised quite closely, so be prepared to answer a few more questions before you submit your application. As with any application for finance the lender will want to determine how financially responsible you are and how likely it is that you will repay the loan.

Borrow with a gifted deposit
The lender may want to know where and what you have spent your money on up to date. If you have paid off any debts in full or purchased something large with savings (for example a car) be sure to let your broker know when going through your assets. Similarly if you have been renting this would be a good point to put to the lender to show stability in previous payments.

Loans requiring non-genuine savings generally command a higher interest rate. This is what we call a ‘for now’ loan. Getting your foot in the door to be able to pay down the debt and grow equity in your asset. Down the track you can always look to refinance to a more competitive product with a lower interest rate.

Exactly What Is Non-Genuine Savings?

Genuine savings are sums of money deposited into your account either as a gift from an immediate family member (such as parents, grandparents, siblings or de facto family members) or as a lump sum transaction.
These transactions can include:
  • First Home Owners Grant
  • An Inheritance
  • Financing – personal loans or borrowings
  • Advances on wages or commission
  • Bonus
  • Tax refunds
  • Sale of an asset – For example a vehicle
It is important to note that lump sums, if left in an account untouched for 3 to 6 months, can actually be considered as genuine savings.

When is Genuine Savings Genuine?

Genuine savings is money you have saved over a period of time. For example: Putting away $200 per week in a bank account. Generally lenders look at genuine savings as one way to determine your character and stability. They like to know that you are able to budget and have a habit of saving.
Genuine savings can include:
  • Savings in an account for 3 to 6 months
  • Existing equity in property
  • Proceeds from the sale of a property you own

Gift Letter/Statutory Declaration

Along with your application you will be required to supply the lender with a gift letter or statutory declaration from the gift giver outlining the following:
  • Date
  • The name of the person gifting the funds
  • Their relationship to you – the gift must be from an immediate family member as previously stated
  • Your name – the person receiving the gift
  • The gift amount
  • The letter must state ‘This amount is a gift and as such is non-repayable’
  • Must be signed by the gift giver
  • Some lenders (but not all) require the letter to be in the form of a statutory declaration and witnessed by a Justice of the Peace
If you are considering giving a family member a non-refundable gift, it is recommended you seek independent financial advice to ensure you are not putting yourself in jeopardy financially.
If you have any questions about savings, as always, feel free to give us a call.
Until next time… stay savvy!
Nardia