For many first home buyers, getting help from family or friends with a deposit is the key to getting into the market. That support usually comes in the form of a gift or a loan—but what’s the difference, and what does the bank need to see?
What is a gift or loan letter?
When a family member or friend contributes toward your deposit, the bank wants clarity on whether that money is a gift (no expectation of repayment) or a loan (expected to be paid back). In either case, they’ll ask for a signed letter to confirm the terms.
The good news is that either option is generally acceptable to lenders—as long as it meets their criteria.
Loan letters and deeds of acknowledgement of debt
In many cases, a lawyer or solicitor may recommend a loan letter, also known as a deed of acknowledgement of debt. This document outlines that the funds are a loan that may be repaid in the future, often only once the property is sold.
This gives flexibility for both parties. The lender of the funds (usually parents or close relatives) has the option to request repayment down the track, but it doesn’t place pressure on the buyer to make regular repayments like a standard loan would.
A loan letter can also be a smart way to protect family wealth, especially in the case of future relationship property matters. If the couple were to separate, the loaned funds are typically recognised as being owed back to the original family, rather than being split as part of relationship property.
What banks want to see
From the bank’s perspective, they just need assurance that:
The funds are not repayable over a set term (i.e., no fixed repayments or timeline),
There is no interest being charged,
The family member or friend is not taking a legal charge over the property.
Whether it’s a gift or a loan, these conditions are usually what the bank checks to ensure the deposit funds don’t create additional financial pressure on the buyer.
When to provide the letter
You don’t need to have your gift or loan letter ready before getting preapproved. In fact, it’s common to include your preapproval subject to providing the correct documentation once you’ve found the right property.
We provide templates for both gift and loan letters, so once you’re ready to move forward, we’ll help you ensure the right document is submitted to the bank—matching exactly what they need to see.
Let’s set it up right from the start
If you’re preparing to buy your first home and expect support from family, we’ll help you get preapproved and guide you through the gift or loan letter process. It doesn’t need to be stressful or complicated—with the right advice, it’s just one more step toward home ownership.