With more first home buyers relying on family support to get into the market, we explain why it may be beneficial to put the details in writing if Mum and Dad offer a financial helping hand.
Higher home prices are seeing more first homebuyers turn to family members for help buying a place of their own.
That support can come in a variety of forms, including living at home rent-free to help grow a deposit, or having parents act as guarantor for a first home loan.
But it can also go one step further.
An estimated 60% of first homebuyers have dipped into the ‘Bank of Mum and Dad’ – receiving financial assistance from parents – to get started in the market.
The amounts handed over aren’t small, averaging more than $30,000 according to one study.
With that sort of money changing hands, it can be worth having a written agreement in place.
As many as 64% of first homebuyers who rely on the support of parents have no paperwork at all for the arrangement, which can make things complicated with lenders.
Let’s take a look at why it’s worth considering putting the details in writing.
In general, parents provide funds to their first-home-buying children as a loan, a gift or an early inheritance.
For first homebuyers, this injection of cash can cut the time taken to save a deposit, or push a deposit up to 20% – the amount usually required to avoid lenders mortgage insurance if you’re not relying on any federal government or lender schemes.
A bigger deposit may also have the upside of giving buyers access to lower interest rates.
If you’re expecting Mum and Dad – or other close relatives – to offer cash towards buying a first home, it’s likely your lender will ask whether the money is a gift or a loan.
This distinction matters because if the money is a loan, the bank may take the repayments to parents into account when considering your ability to service a home loan.
This could even impact your borrowing power.
That said, research shows nearly half (49%) of parents who provide financial assistance to their children do not expect to be repaid.
More than a quarter (26%) offer the money as a gift.
Even so, having these details set out in writing before applying for a home loan can answer a lender’s questions about funding sourced from Mum and Dad, and help prevent delays in your loan application.
New anti-money laundering laws in place from 1 July 2026 mean that real estate agents are now required to verify the identity of home buyers, and in some cases, ask about where the funds used to buy a home came from.
Here too, it can be handy to have a written document that describes the nature of support from parents.
It depends on the type of arrangement.
If the money is a gift, a statutory declaration signed by your local Justice of the Peace (JP) confirming there’s no repayment expected is usually enough.
For anything more, such as the money being a loan or your parents acting as guarantor, you’ll want to seek legal advice from your solicitor.
The financial assistance of family members can give first homebuyers a valuable leg-up with a deposit.
But your deposit is just one part of the picture.
Lenders usually want to see that you’ve been regularly setting money aside in savings – usually for at least three to six months.
This evidence of ‘genuine savings’ shows you have the discipline to manage a home loan.
Also, your personal income still does a lot of the heavy lifting in determining if you’re eligible for a home loan.
After all, family members may provide a generous helping hand to get you started, but you need to be able to live comfortably with your loan over the long term.
Talk to us if you’re thinking of using the Bank of Mum and Dad to buy your first home. We can let you know what lenders like to see when applying for a home loan, and guide you through the rest of the process.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
Paul da Silva
Director & Senior Mortgage Advisor
