Every lender has their own terms and conditions, and this is intended only as a general guide to understanding this topic. Contact us to discuss your individual circumstances.
Gift from family
The family could provide a gift of money to the purchaser. If it isn’t to be treated as a repayable loan by the bank, then the family member giving the gift will need to provide a statutory declaration signed by a Justice of the Peace. An example of how it may be worded:
- I have gifted (my daughter) (name) $100,000. This is not a loan and is not repayable and is non-refundable.
The gifter, will also need to provide proof to the lender that the money is available to give away, by providing copies of bank statements.
✓It is straight forward, and the lender won’t have to take into account the borrower’s capacity to repay, as it isn’t a loan.
✓The purchaser/borrower may also have to provide proof of Genuine Savings, in essence to prove that they have the capacity to manage a regular financial commitment.
✓The money legally becomes the purchasers with no recourse to the gifters – a true “gift”.
✓Future relationships, eg de facto, marriage etc will mean that a portion of the property may become an asset of the other party.
Loan from family – term loan
A loan that is repayable to the family on a regular basis. It may be monthly repayments, or repayable at a certain time. There may or may not be interest charged.
✓The family have recourse to the money
✓If a market rate of interest is charged, then the family don’t lose the investment value of their savings.
The lender will assume that the loan is similar to a personal loan, and will assume a standard variable interest rate, probably with a buffer to calculate loan repayments when calculating the borrower’s capacity to repay the home loan.