Gift Letters: The Key to Unlocking Your Australian Home Loan in 2025
With property prices still climbing and lenders tightening their approval criteria in 2025, many first-home buyers in Australia are relying on family support to get onto the property ladder. But a cash gift from Mum and Dad isn’t enough on its own—banks want proof that it’s genuinely a gift, not a secret loan. That’s where a gift letter comes in. Here’s what you need to know to make sure your gifted deposit helps, not hinders, your mortgage application.
What Is a Gift Letter—and Why Do Lenders Demand It?
A gift letter is a formal document that confirms money given to a home buyer is a genuine gift, not a loan that needs to be repaid. Australian lenders have become more vigilant about the source of deposit funds, especially as the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) crack down on risky lending practices in 2025. If your deposit includes money from parents or relatives, you’ll almost certainly need a signed gift letter to satisfy the bank’s requirements.
- Purpose: To prove to lenders that gifted funds are not expected to be repaid, ensuring the borrower isn’t taking on hidden debt.
- When Required: Any time part of your deposit is a gift, whether from parents, siblings, or extended family.
- Who Signs: The person giving the gift (the donor) and sometimes the recipient (the home buyer).
Without this documentation, lenders may refuse to count the gift towards your deposit, jeopardising your loan approval. In 2025, most major banks and non-bank lenders have updated their application processes to specifically ask for gift letters for any non-saved deposit contributions.
2025 Policy Updates: What’s New for Gift Letters?
Several factors have changed the landscape for gifted deposits in 2025. Here’s what you need to watch out for:
- Stricter Verification: Lenders now require more robust evidence of gifted funds, often asking for transaction receipts and even follow-up calls to donors.
- First Home Guarantee Scheme (FHGS): If you’re using a government scheme, be aware that the National Housing Finance and Investment Corporation (NHFIC) has updated its policies to allow gifted deposits, but only with clear documentation and no expectation of repayment.
- Anti-Money Laundering (AML) Compliance: Banks are under pressure to ensure that gifted funds are not linked to money laundering or tax evasion, so be prepared for extra questions about the source of the gift.
- Genuine Savings Rule: Some lenders still require a minimum portion of your deposit to be ‘genuine savings’, meaning held in your account for at least three months—even if you have a gift letter. However, several non-bank lenders in 2025 now accept 100% gifted deposits for strong applicants.
Example: Jane and Sam received $40,000 from Sam’s parents to help buy their first home in Sydney. Their lender asked for a signed gift letter stating the funds were a non-repayable gift. The bank also requested a screenshot of the transfer and a recent bank statement showing the funds in Jane and Sam’s account. Because they provided all documentation up front, their pre-approval was processed in just five days.
How to Write a Gift Letter That Satisfies Your Lender
Not all gift letters are created equal. A vague or incomplete letter can delay or derail your application. Here’s what to include for a bulletproof gift letter in 2025:
- Full names and contact details of both donor and recipient
- Relationship (e.g., parent, grandparent, sibling)
- Amount gifted and date of transfer
- A clear statement that the funds are an unconditional gift with no requirement for repayment
- Purpose of the gift (e.g., deposit for purchase of 123 Example St, Melbourne VIC)
- Signatures of the donor (and recipient, if requested by the lender)
Some banks provide their own template, but you can also draft your own. Here’s a quick template you can adapt:
I, [Donor Name], confirm that I have given [Recipient Name] the sum of $[Amount] as a non-repayable gift for the purpose of purchasing a home at [Property Address]. This gift is unconditional and does not need to be repaid. Signed, [Donor Signature & Date]
Always check with your lender or broker for any extra requirements before submitting your letter.
Common Pitfalls—and How to Avoid Them
Even with the best intentions, mistakes with gifted deposits can slow down your home-buying journey. Here are the most common pitfalls in 2025, and how to sidestep them:
- Delayed Documentation: Don’t wait until the last minute. Provide your gift letter and evidence of funds as early as possible in the loan process.
- Unexplained Large Transfers: Sudden, unexplained cash deposits can trigger lender scrutiny. Always match your gift letter to your bank statements and transaction history.
- Implied Repayment: Any hint that the money is a loan—even informally—can void your application. Make sure the letter is clear and unequivocal.
- Tax Implications: While Australia doesn’t have a specific ‘gift tax’, large gifts can have Centrelink and tax consequences for the giver. If in doubt, consult a tax professional.
With careful planning, a gift letter can turn family support into a powerful tool for getting your home loan across the line in 2025.
