A nationally representative survey by Money.com.au, reported by news.com.au and realestate.com.au, has found that 64% of first-home buyers receiving parental financial support have no formal written agreement in place — relying on a verbal understanding or nothing at all. Just 36% had a legally binding contract.
Nick Burgess (pictured), mortgage expert at Money.com.au, says the stakes are too high for that.
"Property prices have become so expensive that many first-home buyers can't buy a home without the Bank of Mum and Dad. But when tens or even hundreds of thousands of dollars are being lent, gifted, or secured against the family home, relying on a verbal understanding can create problems later on," Burgess said.
The most common flashpoint is whether parental contributions count as a gift or a loan — a distinction that carries significant legal and financial weight, and one with direct lending consequences.
If a parental contribution is structured as a loan, even informally, lenders will treat it as a liability and factor repayments into serviceability calculations — potentially reducing the client's borrowing capacity before the application has even been assessed.
While lenders typically require a letter confirming whether funds are a gift or a loan during mortgage assessment, Burgess cautioned that a lender letter falls well short of a proper family agreement. It leaves unanswered the key questions: what happens if the property is sold, the relationship breaks down, or family circumstances shift.
The consequences can be severe.
"For example, I've seen family disputes emerge years after a property purchase because there was never a clear agreement about whether the deposit was intended for their child alone or for the couple jointly," Burgess said. "Things also get complicated when parents have guaranteed part of the loan and the relationship later breaks down. In some cases, lawyers need to get involved, and what started as a generous gesture can turn sour for everyone involved."
Guarantor arrangements carry the highest exposure of all — with a parent's home on the line if the borrower defaults. Brokers nationwide are writing more guarantor loans than ever, with one Queensland broker reporting more in the past 12 months than in the previous four years combined.
Among the minority of families who did have formal documentation, the most striking gap was at the ownership end: only 14% included details about equity share arrangements or whether contributing parents hold a financial interest in the home.
Further up the scale, 23% covered repayment obligations if the property was sold, around 39% outlined what would happen to the funds in the event of a separation, and nearly half (46%) addressed the fundamental question of whether the parental contribution was a gift or a loan requiring repayment — leaving even the best-documented deals with significant blind spots.
The research also highlights just how entrenched parental support has become for younger buyers.
More than one in five Australians (21%) received family financial assistance for their first home purchase, spanning cash gifts, loans, and guarantor arrangements. Gen Z buyers were the most reliant, with 76% receiving some form of parental or family contribution — cash gifts being the most common at 39%. Millennials followed at 38%, while only 8% of Baby Boomers reported the same when they purchased their first home.
For mortgage brokers, two questions should be standard where parental support is in play: is the arrangement documented, and is it a gift or a loan? The first determines what happens if things go wrong. The second shapes the serviceability assessment.
A third question should go to the parents. A Compare Club survey found 6% had gone into debt to help a child buy, with those using reverse mortgages 64% more likely to experience mortgage stress than the average Australian. Whether parental support could compromise retirement security is increasingly part of responsible broker practice — and the conversation that protects everyone.
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