Helping your children buy a home – what are your options?

With house prices rising faster than wages in many parts of Australia, it’s no surprise that more parents are stepping in to help their children get onto the property ladder.  There are several ways to help, each with its own benefits, risks, and legal implications. Here’s a guide to the most common options, and what you should consider before committing.

1. Gifting a deposit

   A straightforward and popular option is to give your child a lump sum towards their deposit.  It might be a few thousand dollars or enough to help them avoid lenders mortgage insurance. Tip: A formal statutory declaration that confirms the money is a non-refundable gift (not a loan) may be required by lenders.

Advantages Simple and quick. Can assist your child secure a better interest rate or obtain loan approval.

Disadvantages You lose control over how your money is used.  Could affect your child’s eligibility for first home buyer grants.  If your child separates from their partner, the gift may become part of the asset pool.

2. Loaning money

   If you would prefer to retain some control over your funds or expect to be repaid, a private loan may be the answer.  This can be structured with or without interest, and repayments can be flexible. Tip:  A formal loan agreement with security (like a mortgage over the property), is highly recommended.

Advantages You maintain legal rights as a creditor. You can set terms that suit both parties

Disadvantages Disputes can arise of the terms are not clearly documented. Banks may still treat it as a liability when assessing your child's borrowing capacity. If your child is granting a mortgage to a bank, your mortgage (if any) may need to be subordinate to the bank's mortgage - meaning that the bank get the first bite of sale proceeds.

3. Acting as a guarantor

   Rather than hand over money, you can guarantee part of your child’s loan, usually secured against your own property.  This can reduce or eliminate the need for a cash deposit. Tip:  Banks can offer limited guarantees to reduce your risk.  Just ask!

Advantages No cash outlay upfront. Helps your child avoid costly lenders mortgage insurance.

Disadvantages You are legally liable if your child cannot make repayments. Your home may be at risk if things go wrong.  Can impact your ability to borrow yourself in the future.

4. Joint purchase or co-ownership

   In this structure, you and your child both appear on the property title — you may be joint tenants or tenants in common, with an agreed share split. Tip:  A co-ownership agreement can clarify rights, responsibilities, and exit strategies.

Advantages You may share in any capital growth. May give you more say over decisions about the property.

Disadvantages May add complications if either party wants to sell or changes arrangements (including in relation to transfer duty). Could effect eligibility for grants or tax concessions. You may be liable for land tax or capital gains tax in the future.

Things to Consider

Before helping your child buy a home, ask yourself:

• Can I afford it?  Don’t compromise your own retirement or financial security.

• What happens if your child separates from their partner or defaults?

• Consider future relationship breakdowns, job loss, or illness.

• Do we need a written agreement?

To make the best choice, involve your child in open discussions, seek legal and financial advice, and document everything clearly.  That way, you’re not just building a house — you’re helping build a strong foundation for their future.