Deposit & Equity

How Lenders Assess Deposit and Equity

The assets and equity assessment examines whether the borrower has sufficient capital to contribute to the transaction and whether that capital meets the lender's source and history requirements.

Genuine savings

Genuine savings are funds accumulated gradually over time through a borrower's own savings effort. Most lenders require evidence of at least 3 months of savings history — demonstrating that the borrower has the financial discipline to regularly set aside money.

What typically qualifies as genuine savings:

• Regular savings accumulated over 3+ months in a deposit account
• Term deposits held for the required period
• Managed investments held for the required period
• Equity in an existing property (treated as equivalent to savings)
• Rental payments made consistently over the required period (at some lenders)

What typically does not automatically qualify without additional evidence:

• Lump sum gifts from family members
• Recent tax refunds
• Inheritance proceeds received within the qualifying period
• Sale proceeds from non-property assets recently converted to cash

For gifted funds, most lenders require a formal statutory declaration that the funds are non-repayable and a holding period in the recipient's account (commonly 3 months) before they are treated as genuine savings.

The 80% LVR threshold and LMI

The 80% LVR threshold is the line at which Lenders Mortgage Insurance becomes required for most mainstream lenders. Above 80% LVR (loan amount greater than 80% of the lender's assessed value), LMI is typically required.

LMI is a one-off premium paid by the borrower that protects the lender — not the borrower — against loss in the event of default. It is typically capitalised into the loan. The cost varies with LVR and loan amount but can be a significant additional expense, particularly at LVRs above 90%.

Professional LMI waivers

Certain lenders offer LMI waivers for specific professional categories, most commonly:

• Medical practitioners (doctors, specialists, dentists, veterinarians) — conditions vary by lender
• Legal professionals — at certain lenders
• Accounting professionals — at certain lenders

Waivers typically apply to LVRs up to 90%, sometimes 95% at specific lenders for specific profession categories. The waiver covers the LMI premium only — the borrower still goes through normal credit assessment and must meet all other lending requirements.

Eligibility is determined by the lender's specific approved profession list and typically requires AHPRA registration (for medical) or equivalent professional body registration.

Gift funds

Where the deposit includes a gift from a family member, lenders typically require:

• A statutory declaration (gift letter) confirming the funds are a gift and not a loan
• Verification that the funds have been received
• A holding period in the borrower's account before settlement

If the gift is from an overseas relative, additional documentation and potentially AML verification may be required.

Equity release from existing property

Borrowers with equity in an existing property can access that equity as the deposit contribution for a new purchase. Usable equity is typically calculated as the amount available up to 80% LVR on the existing property, less any outstanding debt.

The lender orders an independent valuation of the existing property. The borrower's opinion of market value is not used — the lender's assessment determines usable equity. In a softening market, valuations may come in below expectation.

Guarantor structures

A family guarantee (most commonly from parents) allows a family member to offer equity in their property as additional security, enabling the borrower to complete a purchase with a smaller cash deposit or at a higher LVR without paying LMI.

Guarantors bear meaningful risk — in the event of default, the lender may have recourse to the guarantor's property. These arrangements require careful consideration, independent legal advice for the guarantor, and a clear understanding of the exit strategy (how and when the guarantee will be released).

Most lenders offer limited guarantee structures where the guarantee amount is capped rather than applying to the full loan balance.

Pages in this cluster

This cluster draws directly from the Assets & Equity pillar subpages:

• Deposit size and LVR
• LMI and risk transfer
• Genuine savings vs funds to complete
• Usable equity versus theoretical equity
• Accessing equity for future borrowing
• Guarantor structures and family support