First home buyer family money glossary: the terms parents and buyers need to understand
A first home purchase has its own language. Family money adds another layer.
Parents and buyers can use the same word while meaning different things. A parent may say “loan” casually. A lender may need to know whether repayment is actually expected. A family may say “deposit” when they mean several different amounts paid at different points.
This glossary gives you a shared starting point. It does not define what a particular lender will accept or tell your family which arrangement to choose.
Borrower
The person applying for and taking responsibility for the home loan.
If parents are providing money or a guarantee, the adult child is still usually the borrower. Ask the broker or lender exactly who will be named on the loan and who will be named on the property title.
Deposit
Money the buyer contributes towards the purchase.
People also use “deposit” for the amount paid when a contract is signed. Those amounts and timing can vary. Ask the conveyancer, broker, or lender which deposit they mean before relying on a number.
Moneysmart says a 20% house deposit can avoid lenders mortgage insurance, while some buyers may be able to purchase with a smaller deposit. That is general guidance, not a promise that a particular lender or scheme will accept an application.
Gifted deposit
A plain-English label for deposit money given by another person, often a parent, without an expectation that it will be repaid.
“Gifted deposit” is not a substitute for asking the lender what evidence it needs. Some lenders may ask for a gift letter or declaration. If anyone privately expects repayment, the family needs to say that clearly to the broker, lender, and lawyer.
Family loan
Money provided by a family member with an expectation that it will be repaid.
A family loan may raise questions about repayment terms, records, interest, security, the home loan application, relationship breakdown, and the parent’s estate. A lawyer can help the family document what everyone means before money moves.
Guarantor
A person who promises to repay another person’s loan if the borrower cannot.
Moneysmart says a guarantor may have to repay the loan, interest, fees, and charges, and an asset used as security may be at risk. Ask the lender, broker, and a lawyer what amount is covered, what property is exposed, and how the guarantee can end.
A guarantor is not the same as a parent giving deposit money.
Lenders mortgage insurance (LMI)
Insurance that protects the lender if the borrower cannot repay the loan.
Moneysmart says LMI protects the lender, not the borrower, and is usually a one-off borrower cost when the amount borrowed exceeds 80% of the property’s value. Ask the broker or lender whether LMI applies and what it would cost in the specific loan being considered.
Pre-approval
An early lender assessment that indicates a buyer may be eligible to apply for a loan up to a stated amount.
Moneysmart says pre-approval usually lasts for a limited period, does not commit the buyer to a loan, and is based on evidence of the buyer’s financial position. It is not final approval for a particular property.
If family money is involved, ask whether the lender has already been told what the money is and whether repayment is expected.
Borrowing capacity
An estimate of how much a lender may be willing to lend after assessing the application.
It is not the same as what the buyer feels comfortable repaying. Family support, other debts, living costs, income, and lender policy may affect the assessment. The broker or lender can explain how the application has been assessed.
Conveyancer
A licensed person or business that handles conveyancing work. Conveyancing is the legal transfer of property ownership from seller to buyer.
A conveyancer or property lawyer can review the contract, explain the settlement process, and identify where family money or ownership arrangements need separate legal work.
Contract of sale
The legal document setting out the property sale.
Contract rules and cooling-off rights vary by state, territory, and sale method. Have the contract reviewed by a conveyancer or solicitor before signing or bidding where the process allows.
Settlement
The point when the purchase is completed, the balance is paid, and ownership transfers to the buyer.
Moneysmart explains that the solicitor or conveyancer generally finalises settlement with the lender and seller. The contract sets the settlement period.
Loan-to-value ratio (LVR)
Moneysmart defines LVR as the loan amount expressed as a percentage of the value of the asset being purchased.
Families often hear LVR when discussing deposit size, LMI, or guarantor support. Ask the broker or lender which property value and loan amount they are using. Do not assume the purchase price and lender valuation are always the same.
Serviceability
APRA describes serviceability as the calculation of whether a borrower can afford loan repayments after other income and expenses are considered.
A family contribution does not automatically answer the serviceability question. Ask the broker or lender how a gift, family loan, guarantee, or ongoing family support is treated in the specific application.
Title
The legal record of ownership of the property.
Being on the loan and being on title are related but different questions. If a parent may become a co-owner or contribute money in return for an ownership interest, speak with a property lawyer and tax adviser before agreeing to the structure.
The three questions to keep asking
When a new term appears, ask:
- What does this mean in this application?
- Who needs to confirm it: the broker, lender, conveyancer, lawyer, accountant, or another professional?
- Does everyone in the family mean the same thing when they use the term?
Then use the Parent Deposit Checklist to write down the arrangement before money moves.