Why deposit source matters more than most buyers expect
You have the money in the account. The number looks right. Then the lender asks where it came from, and things get complicated. Deposit source is one of the most misunderstood parts of a home or investment loan application in Australia, and getting it wrong can delay approval or push you toward a lender with tighter terms.
This post explains how lenders currently assess deposit funds, what counts as genuine savings, how gifted deposits are treated, and what the distinction means specifically for investment property buyers.
How lenders define genuine savings
Genuine savings are funds you have saved over a period of time, typically at least three months. In the eyes of a lender, this shows you are responsible with money and can budget, making you less risky than a borrower with a less diligent savings habit.
The threshold that triggers scrutiny is your loan-to-value ratio (LVR). Most lenders require you to demonstrate genuine savings if you are borrowing more than 80% of the value of a property, with 5% of the expected purchase price as the common minimum.
A rough guide to where genuine savings requirements kick in, based on general industry practice:
- 80% LVR or below (20%+ deposit): genuine savings generally not required
- 85-90% LVR (10-15% deposit): genuine savings likely required by most lenders
- Above 90% LVR (under 10% deposit): genuine savings almost always required
At 95% LVR (5% deposit), you will need to show genuine savings; at 100% LVR with a guarantor, genuine savings generally are not required.
What counts as genuine savings?
Items commonly accepted include: savings held in an account in your name for more than three months, term deposits held for at least three months, managed funds and shares held for more than three months, and equity in residential property from previous purchases. Some lenders will also accept a letter from a licensed real estate agent confirming rent has been paid on time and in full for the preceding 12 months.
What does not count (at least initially)?
Genuine savings are considered different from regular savings you may have received as a one-off work bonus, from selling a car, or as a gift from someone else. Having that money is not a problem, but it does not count as savings you accumulated yourself over time.
For investment property in particular, lenders can apply stricter rules. In some cases, particularly for investment properties, lenders require greater than 5% of the purchase price as genuine savings. Some lenders will generally not offer a no-genuine-savings loan if you are buying a property as an investment.
How gifted deposits are treated
Family gifts are common. In 2025, 17% of Australian first home buyers say they rely on at least some money from their parents. Lenders know this, and most major lenders do accept gifted deposits, but with conditions.
Who can gift the funds?
Gifted deposits typically originate from immediate family members such as parents, grandparents, or siblings. It is this familial connection that assures lenders the money is a gift and not a loan in disguise, ensuring borrowers are not overburdened by unrecorded debts. If someone in your extended family, such as an uncle, aunt, or cousin, is gifting a deposit, lenders will assess the closeness of the relationship and may require additional explanation.
What documentation is required?
When assessing a loan application that includes a gifted deposit, lenders focus on confirming the source of funds and ensuring the money does not create additional repayment obligations. They will generally require written confirmation that the deposit is a genuine gift with no expectation of repayment.
Australian financial institutions operate under anti-money laundering obligations, which can require lenders to understand the source of funds used in major financial transactions, including property purchases. Guidance published by AUSTRAC explains that institutions must verify customer identity and understand the origin of funds in higher-risk situations. Large cash gifts are more scrutinised than bank transfers for this reason.
The critical catch: a gift is not always genuine savings
Accepting a gifted deposit and treating it as genuine savings are two different things. Some lenders may still want to see evidence of your own savings even when a gifted deposit is used. Most mortgage lenders accept gifted deposits, but many also want to see evidence of genuine savings, expecting you to have a savings habit toward at least 3-5% of the deposit, with consistent savings over time.
There is one common workaround. Non-genuine savings do not stay non-genuine forever. If you hold the funds in the same account for at least three months, they can count as genuine savings. This means a gift or inheritance, once it has sat in your account for three months, may be reclassified by many lenders. Policies vary, so confirm this with a broker before counting on it.
What about gifted deposits on investment loans?
Gifted funds are not restricted to purchasing a home to live in; they can also be used for investment property purchases. However, lenders tend to apply tighter assessment to investment applications overall. Some lenders cap investor LVR at 90% where they would lend to 95% for an owner-occupier. Confirming what your chosen lender allows for an investor with a mixed genuine/gifted deposit is a necessary step before exchange.
A worked example
Take a buyer purchasing an $800,000 investment property with a $120,000 deposit (15% deposit, 85% LVR).
Scenario A: $120,000 has been in the buyer's savings and share accounts for more than three months. This would generally satisfy most lenders' genuine savings test at this LVR. No LMI may be required at 85% depending on the lender, though some still require LMI above 80%. The application is straightforward.
Scenario B: $80,000 is the buyer's own savings (held for three months), and $40,000 arrived as a parental gift last week. The application is more complex. The lender may accept the gift as part of the deposit but require a signed gift letter, evidence of the source of the parents' funds, and confirmation no repayment is expected. The lender may still want the full 5% genuine savings component ($40,000 on this purchase price) satisfied from the buyer's own funds alone. If the donor expects repayment, the funds may be treated as a loan rather than a gift, and repayments must then be included in the serviceability assessment, reducing borrowing capacity.
Scenario C: The same $40,000 parental gift was deposited three months ago and has sat untouched. Cash gifts and inheritance funds held for at least three months are accepted as genuine savings by some lenders. The application may now be closer to Scenario A depending on lender policy.
The costs beyond the deposit also need to sit somewhere. Stamp duty, legal fees, building and pest inspections, and lender valuation costs all come on top. Lenders generally only require 5% of the purchase price to be held for three months or longer; funds for stamp duty and other costs do not have to be held for that period.
What to do next
If you are preparing a deposit for an investment property purchase, three things are worth acting on now:
Map your deposit sources in writing. List what you have, where it is held, and when each parcel arrived. This is exactly what a broker will ask for, and having it ready speeds up the pre-approval conversation considerably.
Speak with a licensed mortgage broker. Lender policies on genuine savings and gifted deposits vary more than most people realise. A broker with investment lending experience can identify which lenders apply the most suitable criteria for your specific deposit mix, LVR, and property type. EWC works with specialist finance partners who handle this assessment; you can start that conversation at /contact or book a call at https://elitewealthcreators.com/booking/.
Factor in the full deposit picture, not just the loan amount. Stamp duty, LMI (where applicable), conveyancing, and any building inspection fees are cash costs due at or before settlement. These should sit separately from the deposit funds you are presenting as genuine savings. If you want to understand how these costs stack up for a specific property type and state, get in touch.
For more on how investment property finance is structured, including using existing equity as a deposit pathway, see our insights blog.
General information only, not personal financial advice. Speak with a licensed adviser before acting.