The bank of mum and dad
Many first home buyers receive help from family, whether that's a cash gift, a loan, or parents going guarantor. While this generosity makes home ownership possible for many, it needs to be structured correctly to protect everyone involved.
"The conversations families avoid having upfront often become disputes later. Clear documentation protects relationships."
Gift or loan?
This is the first question to answer. The distinction matters for several reasons:
Lenders need to know if money is a gift (no repayment) or a loan (which affects serviceability)
If the relationship ends, gifts and loans are treated differently under the Property (Relationships) Act formally unless agreed otherwise
Parents may want to treat all children equally when they pass away
Family loans done right
If parents are lending money rather than gifting it, a formal loan agreement protects everyone:
- Clear terms: Amount, interest (if any), repayment schedule
- What happens if: The property is sold? The relationship ends? The parents need the money back?
- Security: Whether the loan is secured against the property
Guarantees: understand the risk
Some parents offer to guarantee their child's mortgage, often using equity in their own home. This can help you borrow more or avoid lenders mortgage insurance, but parents need to understand what they're signing up for.
Important:
As a guarantor, parents become liable for the debt if the borrower can't pay. In the worst case, they could lose their own home. We always recommend guarantors get independent legal advice.
We can help structure family assistance
Whether you are receiving help or providing it, we can document the arrangement properly and ensure everyone understands their rights and obligations.
- Gift letters for bank requirements
- Family loan agreements
- Independent advice for guarantors
- Relationship property contracting out agreements
Talk to us early, ideally before you find a property. Call 06 835 7394 or email 06 835 7394 .
How we help
We help document family contributions properly, whether gifts, loans, or co-ownership arrangements, to protect everyone's interests.