Getting into your first home doesn’t always mean doing it all on your own. If your parents, or another trusted family member or friend, are in a position to help, the Bank of Mum & Dad could be your not-so-secret weapon.
Whether it’s a financial gift, a loan, or acting as a guarantor, there are a few different ways your family might be able to support you. And the good news? Our friends at Resolve Finance have shared their tips on how even a little help can make a big difference.
Here’s how it can work:
Guarantor Loan
This is one of the most common ways parents help. It means your parents (or someone you trust) use the equity in their own home to guarantee part of your loan, usually your deposit.
- You may be able to buy with as little as 5% deposit
- You could avoid paying Lenders Mortgage Insurance (LMI)
Keep in mind: Your guarantor is taking on some financial risk. If you miss repayments, they could be responsible for that portion of the loan. It’s important everyone understands what’s involved.
A Financial Gift
Some families choose to gift money to help with a deposit.
- No repayments needed
- Makes it easier to hit your deposit target
Tip: Lenders usually want to see that a gift is non-repayable and may ask for a “gift letter” confirming that.
A Family Loan
If gifting isn’t an option, a loan from your parents or family could also work.
- Can be flexible with repayments
- Could mean you could make flexible arrangements to suit you and your family.
Important: Put the agreement in writing to avoid confusion or disputes down the track. Consider getting legal advice to protect everyone involved.
Is it the right option for you?
The Bank of Mum & Dad isn’t the right fit for everyone, and that’s okay. But if your family’s open to helping, it’s worth having the conversation. With the right structure and advice, it can be a smart stepping stone into your first home.
Not sure where to start? Chat with our partners at Resolve Finance and they’ll help you figure it out.
**This is not financial advice and is general information. We recommend seeking assistance from a qualified mortgage broker to help determine what’s the right option for your financial situation. Lenders terms and conditions apply. Please note this is a guide only, this information may be subject to change.
All Financial services provided by Resolve Financial Solutions Pty Ltd trading as Resolve Finance ABN: 65 079 545 378 Australian Credit Licence No. 385487
Get started today
Chat to one of our team about making your home happen.