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Straight Answers · Refinancing
My family's paying for part of the renovation. Does the bank need a gift letter?
Bayley Clarke · Mortgage broker on the road · Last checked 11 November 2026 · 2 min read
The short answer
Generally, no. Unless you're applying for cash out, the bank doesn't really know you're doing renovations, especially if it's non-structural stuff. So the bank doesn't care how you fund them. As long as you've got the money to do it, go for it.
It changes when the bank is involved in funding the work, and especially when it's structural. Then we may need a gift letter to show you've got enough money to finish the job, and the bank will generally want a fixed price building contract in place.
The 60 second version, filmed from the driver's seat. The rest of this page is the detail underneath it.
The new kitchen and bathroom
Say you're doing a new kitchen and bathroom, nothing that touches the structure of the house, and mum and dad are chipping in. You're not asking the bank for any money, so there's no application, no assessment, and nobody at the bank looking at where the funds came from. Someone's gifting you the money to do it, so go for it.
The only time a gift shows up on the bank's radar is when it's part of an application, like a gift towards a deposit, or money you need to prove you have so a loan can go ahead. A family member paying the tiler directly on a renovation you're funding yourself isn't that.
When the bank is funding structural work
If you're doing anything structural, like knocking out walls, adding rooms or extending, and the bank is lending you some of the money, it gets more involved. The bank wants to know the job is going to get finished, because a half built extension is worth less than the house you started with.
That's where a gift letter comes in. If part of the cost is coming from family, the bank wants that in writing, showing the money is a gift and doesn't need to be paid back, and generally proof the funds are actually there. Add the bank's share and the family's share together and it needs to cover the full contract price. For structural work, banks generally want a fixed price building contract, and often council approved plans as well, before they'll release the money.
The honest bit: check your loan terms before structural work
Even when you're paying for structural work yourself, your mortgage terms may say you need the bank's consent for major alterations, because the house is their security. It's rarely a problem, but it's worth checking rather than finding out later.
And if family is putting serious money in, it's worth them getting advice on whether they want it treated as a gift or a loan. The bank treats those two very differently.
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Next question
Can I pull equity out for a reno, and will the bank lend me the money for the work?Generally yes, as a cash out: top up the existing loan or add a separate split for the reno.
Related answers
The full guide: Refinancing with a broker The full guide: Using the equity in your home My parents are gifting me the deposit. Does that count as genuine savings? Is there a limit on how much of a gift I can use for my deposit? Should I wait until my renovation is finished before I refinance, or do it now? Can I borrow extra at purchase to fund the renovations?Not your question? Book a call and ask it, or call 0437 189 939.