The Bank of Mum and Dad - What Every Parent Needs to Know Before Helping Their Kids Buy Property
Helping your child buy their first home is one of the most generous things a parent can do. Watching them get the keys, knowing you played a part in making it happen, it's a proud moment.
But before you transfer funds, sign a guarantee or add your name to a title, there's a conversation most families never have. And not having it can be costly.
The Risk Nobody Talks About
Here's the scenario that catches families off guard more than any other.
You help your child buy a property, whether through a gifted deposit, a loan or a family guarantee. A few years later, they meet someone. That person moves in. The relationship becomes serious. And then, for whatever reason, it ends.
In Australia, de facto relationships are recognised under family law. After as little as two years of living together, a partner can make a legal claim on property assets, including any equity that came from your contribution.
That $100,000 you gifted towards your child's deposit? Without the right protections in place, it could be treated as a shared asset in a relationship breakdown. Your generosity, caught in someone else's separation.
This isn't about assuming the worst. It's about being realistic and protecting something that took years to build.
How to Protect Your Contribution
The good news is there are clear, straightforward ways to safeguard what you put in.
Formal Loan Agreement - Rather than gifting the funds, document it as a loan with a signed agreement prepared by a solicitor. This establishes the money as a debt owed to you, not a shared asset.
Binding Financial Agreement (BFA) - Often called a pre-nup, a BFA can be entered into at the start of a de facto relationship or marriage. It sets out clearly what belongs to whom and can specifically protect assets funded by parents.
Tenants in Common - If you're purchasing the property together, this ownership structure allows for clearly defined shares rather than equal joint ownership. It protects your position if things change down the track.
Have the Conversation Early - It may feel uncomfortable, but discussing expectations openly before money changes hands is far less painful than navigating a dispute later. Most kids, when they understand what's at stake, will appreciate the conversation.
Getting the Structure Right From the Start
There are generally four ways parents help their children into property - gifting a deposit, lending a deposit, providing a family guarantee, or purchasing together. Each comes with different implications for your finances, your tax position and your legal exposure.
The structure you choose matters just as much as the amount you contribute. A family guarantee, for example, puts your own home on the line as security. Joint ownership affects your borrowing capacity. A gifted deposit, undocumented, can disappear into a legal grey area.
Getting advice before you commit, not after, is always the cheaper option.
We're Here to Help You Get It Right
At Maher Group we bring together mortgage broking, financial advice and accounting under one roof. When a family comes to us about helping a child into property, we look at the whole picture, not just the loan.
We'll help you understand your options, identify the risks, and put a structure in place that protects everyone involved.
Because the Bank of Mum and Dad works best when it comes with a plan.
Get in touch with the Maher Group team today