Defining Gifts

A common line of questions we receive at Advanced Mortgage Solutions surrounds the giving and receiving of gifts in regards to property purchases. This quick guide may help you determine which situation you are in, however, our advisers are here to answer questions specific to your needs.

What is a gift?

A gift is a sum of money that is being gifted from a family member to help with deposit funds when purchasing a property or pay down debt. There is not minimum or maximum amount for a gift.

There are two main types of gifting, a family member can give money towards the deposit:

• with no intention of needing to be repaid
• with a formal agreement confirming that the money only needs to be repaid if the property is sold

A gift can only be received by a family member and 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:

All banks view the difference between a gift or a loan the same, viewing each as they are financially.

A gift, deed of gift and a deed of forgiveness of debt are all gifts. Because they state there is no repayment either through principal and interest or interest only repayments.

However as soon as there is mention of a loan being repaid (regardless of the time period being stated for the repayment i.e. no repayments for 20 years) then the sum is no longer a gift but a loan.

Since the introduction of the Responsible Lending Code in June 2015 it was made clear that securing a loan in order to secure a loan is not a responsible practice. For example, securing a loan to bolster a deposit to secure a home loan or mortgage is not encouraged.

Gifting is a remarkably generous and supportive option for aspiring home buyers aiming to step onto the property ladder. However, we know it may not be feasible for everyone. Get in touch today to chat about other ways you can get help from a family member.