The Bank of Mum & Dad: How Gifted Deposits Can Help First-Home Buyers

Ever thought how powerfully you could set up your children for a lifetime, when combined with the government’s 5% deposit scheme?..

Pink Elephant  Home Loans knows the exact lenders who accept your gift as deposit savings. That’s what I call “Funding your big bright future!”

If you’ve ever heard the phrase “Bank of Mum and Dad,” you’ll know it’s become one of the biggest ways young Australians are getting into the property market. In fact, family support now ranks as one of the largest sources of deposit funding for first-home buyers.

And it makes sense. With property prices rising faster than wages, many first-home buyers are turning to parents or grandparents for help with their all-important deposit.

In this part of our series, we’ll look at:

• What a gifted deposit is.
• How lenders treat family gifts.
• The pros and cons of using family help.
• Things to be careful about (compliance, relationships, and lender rules).
• How Pink Elephant Home Loans helps clients structure these arrangements.

What is a Gifted Deposit?

A gifted deposit is when a parent, grandparent, or close family member provides you with all or part of your deposit, usually as a cash gift. Unlike a loan, a gift doesn’t have to be repaid—though some families might still expect informal repayment later on.

Example:

• You need a 5% deposit of $30,000 for a $600,000 home.
• Your parents transfer $20,000 into your account as a gift.
• You combine this with your own savings to meet the deposit requirement.

Simple enough—but lenders do have specific rules you need to meet.

How Lenders Treat Gifted Deposits

Not all lenders accept a deposit that comes purely as a gift. Many still require at least part of your deposit to come from genuine savings (money you’ve saved yourself over 3+ months).

However, some lenders are flexible. If your parents gift you the funds, certain banks will accept it as long as you provide a statutory declaration confirming it’s a non-repayable gift.

💡 Tip: Some lenders don’t require gifted funds to “sit” in your account for 3 months. Others do. That’s why working with a broker matters—we can match you with a lender whose policies suit your situation.

The Benefits of a Gifted Deposit

• Faster entry into the market: Instead of waiting years to save, you could buy sooner.
• Smaller loan-to-value ratio (LVR): With a bigger deposit, you borrow less and may avoid LMI (Lenders Mortgage Insurance).
• Family wealth transfer: Parents who are financially comfortable can help children without dipping into their superannuation or selling assets.
• Emotional support: For many, knowing their family believes in their journey makes the buying process less stressful.

The Drawbacks and Considerations

While gifted deposits can be incredibly helpful, there are things to watch out for:

• Lender restrictions: Some lenders won’t accept gifts as deposits unless combined with genuine savings.
• Family dynamics: Money can complicate relationships. Clear communication is key.
• Documentation: Lenders often require signed letters confirming the funds are a gift, not a loan.
• Future borrowing: If your parents stretch themselves to help you, it could limit their own financial flexibility.

Real-Life Example

Tom and Mia had been saving for two years but only managed $15,000—well short of the $40,000 deposit they needed. Tom’s parents stepped in with a $25,000 gift.

Because their broker found a lender that accepted gifted deposits without a 3-month hold, Tom and Mia were able to buy their first home within weeks. Without that help, it would have taken them years.

Gifted Deposits vs. Loans from Family

It’s important to distinguish between a gift and a loan:

• Gift: No expectation of repayment. Requires a signed gift letter or statutory declaration.
• Loan: Must be disclosed to the lender, and repayments are factored into your borrowing capacity.

Most lenders prefer gifts, as loans from family can complicate your financial picture.

How to Structure a Gifted Deposit Safely

1. Have open discussions with your family: Talk about expectations upfront.
2. Provide documentation: A signed letter confirming it’s a gift and not a loan.
3. Work with a broker: Different lenders = different rules. A broker can match you with the right one.
4. Consider mixing with genuine savings: Even a small amount of personal savings strengthens your application.

FAQs About Gifted Deposits

Q: Can gifted deposits be from anyone?

A: Generally, no. Lenders typically only accept gifts from immediate family (parents, grandparents, siblings).

Q: Do I have to pay tax on a gifted deposit?

A: In most cases, no—cash gifts from family aren’t taxable. But always check with an accountant.

Q: Can I use a gift for the full 5% deposit?

A: Yes, some lenders allow this, but others still want evidence of genuine savings.

Q: What if my parents want the money back later?

A: Then it’s not a gift, it’s a loan—and lenders need to factor it into your assessment.

Final Thoughts

The Bank of Mum & Dad has become one of the most powerful tools for first-home buyers in Australia. If your family is in a position to help, a gifted deposit could get you into the market years earlier than saving on your own.

👉 If you’d like to explore whether this could work for you, get in touch—we’ll guide you through every step.