Defining Gifts

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.