When is a gift not a gift?
A common line of questions we receive at Advanced Mortgage Solutions surrounds the giving and receiving of gifts. This is 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.
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. Hence 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
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.
Published by Scott Miller
Today's announcement on Mortgage Holidays
With today’s announcement by the Finance Minister about 6-month mortgage holidays, we have been inundated by enquiries from our clients.
Awesome. We couldn't be more thrilled with our experience and have nothing but high praise for Scott Miller and AMS.Simon Thrupp and Sandra Paterson - 14 August 2018
So proactive, answers all questions quickly and doesn't make you feel silly for some of the things you ask.Ben McBride and Ashleigh Blair - 29 February 2016
Scott just helped us get a mortgage for the first time and was the most helpful out of all the professionals we dealt with, and gave the most useful advice.Mark and Stephanie Chin - 20th November 2015 - 20 November 2015