What is a gifted deposit?

When it comes to gifted deposits, most mortgage lenders prefer to keep it within the family. So, many will accept a source of funds from your parents, siblings, or grandparents. Some will also permit a gifted deposit from more distant relatives such as an aunt or uncle, though the practice isn't prevalent.

It's improbable for a mortgage lender to permit a gifted deposit from a friend. As a rule of thumb, always discuss your options before you pursue them, as some lenders may enforce more restrictive policies than others.

Writing a gifted deposit letter

To confirm the source of the money, your lender will likely request a gifted deposit letter. This letter assures them that you aren't 'borrowing' your deposit via a credit card or other loan. A deposit letter must include information such as:

• The names of the persons giving and receiving the gift
• The sum of the gifted deposit
• That there is no commercial interest in the gesture and that there is no expectation of repayment
• That the gifter holds no stake in the property and cannot jeopardise the mortgage lender's security
• That you remain financially solvent and capable of meeting monthly repayments

Other than the gift giver, a witness will also have to sign and date the letter. Your lender will keep the letter with your application, and your conveyancer or solicitor may also ask for a copy.

You need to take the following features into account when considering a gifted deposit:

Amount limit

How much you receive is entirely up to the gifting party. They can choose to gift a portion of your deposit or cover the whole amount. However, it's vital to keep in mind that contributing a little bit of your savings towards your deposit will look better to the prospective lender.

To determine where the funds are from, your lender might request proof. This proof of funds might be a receipt from the sale of a large asset, shares, or a pension draw-out. If the funds are from a savings account, you might have to provide evidence of the gift giver's long-term savings, in line with anti-money laundering laws.

Interest rate

There is no need to pay a higher interest rate with a gifted deposit. Most lenders will offer the same competitive rates as they do on regular home loans.

Lenders Mortgage Insurance

If you're borrowing over 80% of the property value with a home loan, you'll typically have to pay Lenders Mortgage Insurance (LMI). This policy protects the lender if you default on your loan. In some cases, lenders will allow borrowers to add the LMI premium to the existing loan, which means if you're taking out a $570,000 loan on a $600,000 property, the total loan amount could be around $585,000.

Read our Lenders Mortgage Insurance explainer to find out what it is, how it works, and how it affects you.

Centrelink pension implications

Some gifted deposits come with financial implications, especially if gifters receive pensions as part of a Centrelink payment plan. A gifter may have to declare money depending on the gift amount. To avoid affecting their pension, gifters, whether as a single person or a couple, must limit gifts to $10,000 a financial year and $30,000 over five financial years.

While it's entirely possible to exceed this limit, Centrelink will calculate the excess and apply a process called "deeming" to determine the amount of income support they can provide.

If your family member can't contribute enough for a deposit, they can choose to stand in as a guarantor on your home loan instead. Through this procedure, your parents use the equity in their home to help secure your loan. However, agreeing to stand in as your guarantor involves an entirely different process.

Despite their seeming similarities, a gifted deposit and guarantor home loan serve two different purposes. While a guarantee allows you to increase your borrowing amount up to the full purchase price of the property, a gifted deposit will directly reduce the final loan amount.

A guarantor home loan may be more useful because you can avoid a big upfront deposit. With a guarantor, you're less likely to miss monthly repayments and can work towards eliminating LMI. A few lenders may accept a close relative other than a parent, but friends are rarely accepted.

Our home loan guarantor explainer has everything you need to know about guarantor home loans and how they work.

As much as possible, you'll want to be financially prepared to receive a gifted deposit and understand whether your parents are in a good position to give you one. While a gifted deposit has its perks, it can become a financial strain on both parties.

How they work in your favour

A gifted deposit works in your favour for obvious reasons; when you have one, you can meet your deposit minimum, plus you won't be legally obligated to repay the amount. When compared to a guarantor home loan, the approval process for a gifted deposit is prompt and involves less paperwork. Overall, a gifted deposit is useful in minimising interest payments during the life of your loan.

How they work against you

With a gifted deposit, the long-awaited dream of becoming a homeowner is right around the corner. However, you'll have to consider whether you're financially capable of monthly repayments that will occur after you receive your gift. Will your earnings be enough to settle monthly repayments on time? Could you pay for repairs and replacements on your own?

Some banks will want to see that you demonstrate good financial conduct by asking to review your savings history, credit score, and payslips. Suppose they determine that you're at a monetary disadvantage and don't have a positive rental payment record. If so, a gifted deposit isn't going to make an impact on your eligibility for a loan.

A gifted deposit isn't the only method of securing your minimum deposit. If you're a first-time homebuyer, you might qualify for the First Home Owner Grant (FHOG). It's paid by your state or territory government, and the amount and the price limits vary from state to state. In most states it's now only available for a brand new home or one you build, and you'll need to move in within 12 months and live there for at least six months to a year, depending on the state.

The government's 5% Deposit Scheme (formerly the First Home Loan Deposit Scheme) lets first home buyers buy with a deposit as low as 5% and no LMI, because the government guarantees up to 15% of the loan. Since 1 October 2025 there are no income limits and no cap on the number of places for first home buyers, and single parents earning up to $125,000 can buy with a 2% deposit. The home must be under a price cap that depends on where you buy.

Help to Buy, the government's shared equity scheme, opened in December 2025. The government contributes up to 40% of the price of a new home, or up to 30% of an existing home, in exchange for the same share of the property, and you buy with a deposit of 2%. It has income limits of $100,000 for singles and $160,000 for couples and single parents, as well as price caps, and you need to be an Australian citizen.

As house prices have risen, gifted deposits have become a widely-accepted norm. Many parents are more than willing to provide financial assistance to help their child navigate a continually rising cost of living.

If you're considering gifted deposits as an option, be sure to speak to a mortgage advisor or financial advisor to determine whether it's right for you and how to best go about the process.