Useful Tips

How can family help First Home Buyers

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.

Benefits
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.

Disadvantages
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.

Benefits
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.

Disadvantages
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.