How Gifted Deposit Home Loans Work in Australia
A gifted deposit home loan is a type of mortgage that allows you to use a gift of money from a family member or friend to make up part of your deposit. Gifted deposit home loans can be a great option if you don’t have enough savings to save up a 20% deposit, which is often required by lenders.
To apply for a gifted deposit home loan, you’ll need to meet the lender’s requirements. These requirements may vary from lender to lender, but they typically include:
- A good credit score
- A stable income
- A solid employment history
- A plan to repay the loan
Once you’ve been approved for the home loan, you’ll need to provide the lender with a gift letter from the person who is gifting you the money. This letter should state that the money is a gift and not a loan and that there are no strings attached.
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Who Can Gift a Deposit?
Gifted deposits typically originate from immediate family members such as parents, grandparents, or siblings. It’s this familial connection that assures lenders the money is indeed a gift and not a loan in disguise, ensuring borrowers are not overburdened by unrecorded debts.
However, this may vary between lenders, and it’s crucial to understand each lender’s specific criteria. Some lenders may accept gifts from extended family members or even family friends, whereas others might have a stricter policy. Before proceeding, it’s advisable to confirm the rules with your lender of choice.
The Requirements for a Gifted Deposit Home Loan
To qualify for a gifted deposit home loan, there are several requirements you’ll likely need to meet. These may differ slightly among lenders, but the typical requisites include:
- A Good Credit Score: A strong credit history or credit score reassures lenders that you’re financially responsible and less likely to default on the loan.
- A Stable Income: Regular and reliable income gives lenders confidence in your ability to service the loan consistently.
- A Solid Employment History: Long-term employment or steady work history is another favourable factor in a home loan application.
- A Plan to Repay the Loan: While the deposit might be a gift, the loan is not. You’ll need to demonstrate a realistic repayment plan.
In addition to these, some lenders may require you to maintain a minimum savings balance or have been living in Australia for a specific period. It’s always best to check these requirements with your intended lender.
The Rates for Gifted Deposit Home Loans
Gifted deposit home loan rates can differ from lender to lender. Generally, these rates might be slightly higher than standard home loans due to the perceived increased risk lenders take on. Without a large, personally accumulated deposit, lenders may view borrowers as potentially higher risk.
However, these rates remain competitive. Several factors, such as the overall health of the housing market, the borrower’s creditworthiness, and the lender’s policies, can influence the final rate offered. It’s essential to shop around and compare rates from different lenders before deciding.
Remember, every fraction of a percentage point matters when dealing with long-term home loans.
The Pros and Cons of Gifted Deposit Home Loans
Gifted deposit home loans can be a great way to get on the property ladder if you don’t have enough savings for a 20% deposit. However, there are also some potential drawbacks to consider.
| Pros | Cons |
|---|---|
You can get a home loan with a smaller deposit. | The rates for gifted deposit home loans are typically higher than the rates for standard home loans. |
You may be able to get a lower interest rate than with a standard home loan. | You may have to pay a gift duty fee. |
You can use the money you would have saved for a deposit for other purposes, such as renovations or furniture. | You may be required to have a guarantor. |
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Which Lenders Accept Gifted Deposits?
When it comes to securing a home loan with a gifted deposit, not every lender will be on board. The rules and acceptance criteria can vary significantly from one financial institution to another.
The Big Four banks in Australia typically accept gifted deposits.
- Commonwealth Bank: This major Australian bank is known for its flexible lending criteria, which include acceptance of gifted deposits.
- Australia and New Zealand Banking Group (ANZ): ANZ, another big player in Australia’s banking sector, is also open to customers using gifted deposits for their home loans.
- Westpac: As part of the Big Four, Westpac permits the use of gifted deposits as part of their home loan application process.
- National Australia Bank (NAB): NAB is another significant lender accepting gifted deposits.
Paying Back a Gifted Deposit
While a gifted deposit is generally understood to be a gift that doesn’t need to be paid back, there may be circumstances where you want or need to return the funds.
Firstly, ensure that the person who gave you the gift is comfortable accepting repayment. If they intended the money to be a gift, not a loan, repaying them might be awkward or unwelcome.
Secondly, if the gifter is amenable to being repaid, agree on a repayment schedule that suits both parties. It’s essential to be realistic about what you can afford to avoid further financial strain.
Lastly, make repayments punctually and keep track of them. This transparency can help avoid misunderstandings down the line.
Gifted Deposit Home Loans in Australia: Making Your Dream Home a Reality
Regardless if you’re a Sydney-sider longing for a beachfront property or a foreign buyer seeking a slice of Perth’s bustling city life, a gifted deposit home loan could be your conduit to owning an Australian property. However, it requires careful planning, selecting the right lender, and possibly navigating familial expectations and obligations.
Given the complexity of this journey, professional advice can provide valuable insights and guidance. Our team of expat mortgage brokers at Odin Mortgage can support you in making your homeownership dream a reality.
Connect with us to explore your options and start the journey towards your dream home today.
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Frequently asked questions
What is a gifted deposit home loan?
A gifted deposit home loan allows you to use money gifted by a family member or close relative as a deposit for a home loan.
Can anyone gift money for a home loan deposit?
Typically, the money should be gifted by a close family member. Different lenders have varying rules on who can gift the deposit.
Are all lenders open to accepting gifted deposits?
Not all lenders accept gifted deposits. Some of the lenders that do include Commonwealth Bank, ANZ, Westpac, NAB, Bank of Melbourne, Suncorp, ING, and Macquarie Bank.
Do I need to pay back a gifted deposit?
No, a gifted deposit is generally considered a gift, not a loan. However, if you choose to pay back the gifted deposit, ensure that the gifter is comfortable with this and set up a feasible repayment schedule.
Can a gifted deposit affect my loan rates?
Generally, the rates for gifted deposit home loans are competitive and similar to traditional home loan rates. However, your credit score, loan term, and loan-to-value ratio can impact the final rate.
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