Helping your child or grandchild buy a home: what to check before you say yes

Recent research shows most Australians aged 60 to 80 have given family $10,000 or more, usually as a gift, and almost none got advice first. Before you offer money, check you can still be comfortable in retirement. Then decide whether it's a gift, a loan or a guarantee, and put it in writing. Each carries different risks for you and looks different to the lender.

This guide is for the parent or grandparent doing the helping. Your child can read the buyer's side in Gift, loan or guarantee? How banks actually see the Bank of Mum and Dad.

What families are actually giving

Australian Unity research of 2,000 Australians aged 60 to 80, reported in the AFR shows how common family help has become:

• 65% have given $10,000 or more to a child or grandchild, most often to help buy property.
• The average help towards a first home was $75,800, and it rises sharply with wealth.
• That help typically covers about a quarter to a third of what the first home costs.
• Most gave it as a gift (60%), while 23% treated it as a loan.
• Cost of living drives 53% of giving, and nearly three in four would rather see family benefit while they're alive.

If your figure is smaller, that's fine. These are averages, and the right amount is the one you can afford. The rest of this guide helps you work that out.

Can you afford to help and still be comfortable in retirement?

Start with your own position, not your child's needs. Retirement can run for decades, and money you hand over is hard to get back.

Before you name a figure, look at:

• Your super and savings, and how long they need to last
• What you spend each year, including travel and the things you've planned for
• Any debt still owing, including on your own home
• A buffer for health costs, aged care down the track, and a home that will need repairs

The research found 55% would give even if it meant going without themselves. Going without in your seventies or eighties is hard to reverse, and it can end with your family supporting you. If helping would leave you short, or depend on your child repaying on time, give less or help another way.

Only 17% said they feel completely financially free, and 54% would like to give more but hold back because they're unsure about their own future. Yet just 2% spoke to an expert such as a financial adviser the last time they gave. A licensed financial adviser can model what you can safely give. Get that advice before the money moves, because it's much harder to fix afterwards.

Should you decide on a gift or a loan before you promise anything?

Yes. Once you've said "we'll help with the deposit", it's tempting to sort out details later, and that's where families get into trouble.

A gift and a loan are different things, legally and to a lender. Money from a parent to a child is generally presumed to be a gift, so if you hand it over without paperwork and later call it a loan, that can be hard to prove. Agree on the answer first, write it down, and make sure everyone, the lender included, hears the same thing.

What's the difference between a gift, a loan and a guarantee?

How do you make a family loan real?

Many families skip this step. In the research, only 37% set a repayment schedule and just 22% signed a formal agreement. If you want the money back, treat it as a proper loan from day one:

1. A written loan agreement, prepared or reviewed by a lawyer, setting out the amount, the repayments and when it's due
2. Regular repayments your child actually makes, with a record of each one
3. Interest, even at a low rate, so it reads as a genuine arrangement
4. Security, such as a registered second mortgage, where it suits your family and the main lender allows it
5. Separate legal advice for you and for your child

The point is protection. A well-documented loan puts you in a much stronger position if your child's relationship ends or they run into creditors. A handshake deal is hard to rely on.

What will the lender ask about your help?

How does gifting affect your Age Pension?

A genuine loan isn't a gift. It's treated as a financial asset and deemed, even if you charge no interest. If you might forgive a loan later, speak to Services Australia first. These limits can change, so check them before any money moves.

How do you keep things fair between your children and grandchildren?

Helping one child raises the question of the others. There's no single right answer, but decide on purpose rather than by accident.

Some parents give each child the same amount. Others give based on need, and more than 30% of those surveyed do this, for example more to the child buying in a pricier area. Timing matters too. A gift to the eldest now and the youngest in ten years may not feel equal, even if the dollar figure is.

Talk openly with all your children about what they'd see as fair. If the gift is an early share of an inheritance, update your will to reflect it, with legal advice on the wording. That one step can head off a lot of hurt.

Say what you expect

In the research, 43% gave partly hoping to play a bigger part in their family's lives, but only 40% of people with expectations like that ever said so.

Unspoken expectations breed resentment. If you'd like more time with the grandkids or a say in where they buy, raise it before any money moves. If there are no strings, say that too, so nobody is guessing years later.

What changes when you're helping a grandchild?

Not much. The same rules apply, and the Age Pension gifting limits are the same whether the money goes to a child or a grandchild.

The main difference is family dynamics. Some grandparents give through the parents, others alongside them, and some directly. Either way, keep your grandchild's parents in the conversation so everyone knows what's been given and on what terms.

Frequently asked questions

This is general information only and doesn't take into account your objectives, financial situation or needs. Consider whether it's appropriate for you and get independent legal, tax and financial advice before acting. Credit eligibility criteria, fees and charges apply. Tom Carr, Credit Representative 559744, ACL 561324.