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When is a gift not a gift?

The definition of a gift:

A gift is a sum of money that is being gifted from a family member to help with the deposit funds when purchasing a property or pay down debt.

The rules around a gift:

-          A gift is a sum of money that is given to the recipient without any requirement to pay the gift back. There are no exceptions to this rule.

-          A gift can only be received by a family member

-          No encumbrance can be registered against the Title of the property being purchased by the person giving the gift.

How a lender views a gift verses a loan:

The issue is not so much a banks interpretation, as it is - what is a gift verse a loan mean financially, so all banks view the difference between a gift or a loan the same.

For example a gift, deed of gift and a deed of forgiveness of debt are all viewed as gifts because they state there is no repayment of the loan either through principal and interest or interest only repayments, however as soon as there is mention of the loan being repaid (regardless of the time period being stated for the repayment i.e. no repayments for 20 years) then this is viewed no longer as a gift but as a loan.

Since the introduction of the Responsible Lending Code in June 2015 it was made clear it was no longer responsible to secure a loan to secure a loan. I.e. secure a loan to bolster a deposit to secure a home loan or mortgage.

So to summarise, all lenders view on gifts and loans is the same as all lenders have to follow the changes since the introduction of the Responsible Lending Act.

Please feel free to contact us if you would like any extra information around gifting by calling 0508 466 356 or by contacting us here.

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