If you're a parent of a young adult, you've likely seen the challenges facing first home buyers today — from rising property prices to tightening lending criteria. For many families, the dream of home ownership is only possible with a helping hand from Mum and Dad.
In fact, the 'Bank of Mum and Dad' is now one of the largest lenders in Australia, with parental support playing a major role in helping younger buyers enter the market. If you're considering helping your child buy their first home, here’s what you need to know — including the pros, cons, and smart ways to structure your support.
1. Gifting or Lending Money
A financial gift is one of the most direct and flexible ways to support your child. It can be used toward their deposit or to cover upfront costs such as stamp duty, conveyancing, or lender’s mortgage insurance (LMI).
Things to consider:
- Gifts vs. Loans: If it’s a gift, your child’s lender will likely ask you to sign a statutory declaration or “gift letter” confirming the funds are non-repayable.
- If it’s a loan, lenders will want to see a formal agreement outlining the repayment terms, and it may affect your child’s borrowing capacity.
- Genuine savings: Many lenders require a portion of the deposit to be saved by the borrower, so a gift may need to sit in their account for several months to be counted.
Expert tip: Work with a mortgage broker to structure your contribution correctly and ensure your child can meet lender requirements.
2. Acting as a Guarantor
If you own your home (or have significant equity), you may be able to act as a guarantor on your child’s mortgage. This means using your property to secure part of their loan — often enough to cover the standard 20% deposit, which can help them avoid LMI and boost their borrowing power.
Benefits:
- Helps your child enter the market sooner
- May reduce the overall cost of the loan
- Allows them to borrow up to 100% in some cases
Risks:
- If your child is unable to meet repayments, you could be liable for part or all of the loan
- Your property may be at risk if the loan defaults
- You may limit your own future borrowing capacity
It’s vital to obtain legal and financial advice before proceeding, and to clearly understand the responsibilities involved.
3. Buying Property Together
In some cases, parents and children purchase a property together. This could mean going 50/50 or structuring the ownership in a way that benefits both parties. It’s especially popular where parents are looking to invest, and children need help to secure a home.
Things to keep in mind:
- Your involvement could disqualify your child from first home buyer benefits like stamp duty concessions or the First Home Owner Grant
- There may be capital gains tax implications if the property is sold
- It's essential to have a co-ownership agreement and clear plans for future changes
This approach works best when both parties have aligned goals and a long-term plan.
4. Supporting Them Behind the Scenes
Even if you're not in a position to gift large sums or act as a guarantor, you can still offer valuable support. Consider:
- Letting them live at home rent-free while they save
- Helping with living expenses to accelerate their deposit savings
- Contributing to ongoing mortgage repayments once they’ve purchased
These less formal approaches can reduce financial pressure and make the home-buying process more manageable.
5. Setting Expectations and Having Clear Conversations
Helping your child buy a home is both a financial and emotional commitment. Whether you’re gifting funds, providing security, or just lending moral support, it’s important to have honest conversations about:
- Whether the contribution is a gift or loan
- Expectations around repayment or ownership
- What happens if life circumstances change (e.g., relationship breakdown, financial hardship, sale of the home)
Putting agreements in writing — even informally — can prevent misunderstandings later on and protect everyone’s interests.
6. Get Professional Advice and Guidance
Helping your child buy their first home is a generous and potentially life-changing gesture — but it’s not without risks. The good news is you don’t have to navigate it alone.
A mortgage broker can assess your family’s financial position, explain your options, and guide you toward a solution that protects your interests while giving your child the best start.
Ready to Support Your Child's Home Ownership Journey?
At Dream Catchers Lending, we work with families every day to help first home buyers enter the market with confidence — and the right support. Whether you're gifting, guaranteeing, or just exploring what's possible, we can help you and your child make informed, secure decisions.
Contact us today to learn how you can help your child take the first step onto the property ladder — safely and strategically.
Dream Catchers Lending is an MFAA-accredited member and a Certified Divorce Specialist. Feel free to book an obligation-free virtual appointment or leave us your details and we'll be in touch.