For many Australians, buying a first home has become increasingly out of reach.
Rising property prices, higher interest rates, and ongoing cost-of-living pressures have made saving a deposit one of the biggest financial hurdles facing younger buyers today.
As a result, more families are stepping in to help.
The “Bank of Mum and Dad” is no longer just a phrase- it has become one of the most significant forces in the Australian property market.
In 2025, nearly 1 in 5 first home buyers relied on financial assistance from their parents to enter the market.[1]
At the same time, there has been a clear shift in how that support is provided. Around 75% of parents now provide funds as a gift rather than a loan, reflecting a generational change in approach.[2]
Helping children into the property market is often driven by generosity and a desire to provide stability.
But without the right structure, these arrangements can create unintended risks — for both parents and children.
Why the Bank of Mum & Dad Matters More Than Ever
The growing reliance on family support reflects a broader reality: for many buyers, entering the property market without assistance feels increasingly difficult.
Parental contributions can make a significant difference allowing buyers to:
Enter the market sooner
Borrow more effectively
Retain additional savings after purchase
Compete more confidently in competitive markets
This support can create opportunity, it also introduces complexity.
Once money changes hands, (particularly in the context of property), legal and financial consequences follow.
The Key Question: Is It a Gift or a Loan?
One of the most important decisions families need to make is whether financial assistance will be structured as a gift or a loan.
At first glance, this may seem like a simple or even informal choice.
In reality, it has significant legal implications.
When It’s a Gift
Many parents are happy to treat financial assistance as a gift.
Once a gift has been made, the money may no longer be protected. For example:
If your child separates from their partner, the gifted funds may form part of the asset pool considered in a family law property settlement
If your child becomes bankrupt, those funds may be exposed to creditors
If the property is owned jointly, the surviving partner may become the sole owner in the event of your child’s death
There can also be broader implications, including potential impacts on estate planning and pension entitlements.
These outcomes are rarely front of mind when money is first provided, but they can become highly relevant later.
When It’s a Loan
Alternatively, families may choose to structure the contribution as a loan.
This can provide greater protection, but only if it is properly documented and structured.
Even where there is complete trust between family members, relying on informal arrangements can lead to uncertainty.
Memories fade. Circumstances change. Relationships evolve.
And when they do, the absence of clear documentation can create confusion- or conflict.
Why a Loan Agreement Matters
A properly drafted loan agreement is one of the most effective ways to create clarity and protect everyone involved. It sets out:
Who is lending the money
Who is receiving it
How and when it will be repaid
Whether interest applies
What happens if repayment cannot be made
Importantly, it also creates a clear record of the arrangement, which may be relevant not only for the family, but also for third parties such as:
lenders
courts
trustees in bankruptcy
future partners
Without a written agreement, it can be difficult to prove what was intended. The law may presume it’s a gift (in legal terms this is known as the presumption of advancement). This means you may never be able to recoup the loan money plus and accrued interest.
In situations where legal disputes arise, that lack of clarity can have significant consequences.
Securing the Loan: An Often Overlooked Step
Beyond documenting the loan, families should also consider whether the loan should be secured.
This is a critical step (and one that’s often overlooked).
Real property is often the most effective form of security because it is stable, valuable, identifiable and capable of being formally registered. Unlike other assets, such as cash or personal property, an interest in land can be recorded on title — meaning your position is publicly recognised and cannot be overlooked
A loan that is not secured may be significantly harder to recover if circumstances change.
The most secure option is typically a registered mortgage –over the property being purchased (or other real property that may be already owned by the borrowers).
This ensures that:
the property cannot be sold without addressing the loan
the lender’s interest is formally recognised
there is a clear pathway to enforcement if required
In many cases, where a bank holds the first mortgage, parents may take a second mortgage position.
While this provides less priority than the bank, it still offers a level of protection that an unsecured loan does not.
It is also important to understand:
how much is owed under the first mortgage
how much equity exists in the property
whether there is sufficient value to repay the loan if needed
Without sufficient equity, there is a risk that some (or all) of the loan may not be recoverable.
When Other Parties Are Involved
Things can become more complex where the property is owned by more than one person — for example, where your child purchases with a partner.
In these cases, it is generally important that:
all property owners are parties to the loan agreement
all owners acknowledge the mortgage or security
This ensures the loan is secured against the whole property, rather than just one party’s interest.
Without this, enforcement can become significantly more difficult and costly.
What Happens If Circumstances Change?
One of the key reasons to properly structure Bank of Mum and Dad arrangements is to plan for the unexpected.
Because while everyone may agree on the arrangement today, the future is rarely predictable. Questions to consider include:
What happens if your child separates from their partner?
What happens if your child is unable to repay the loan?
What happens if you or your child pass away before the loan is repaid?
In some cases, parents may also need to consider updating their will to reflect the existence of the loan.
Thinking through these scenarios does not mean expecting the worst. It simply means planning responsibly.
Why Many Solicitors Approach These Matters Carefully
It is worth noting that many solicitors approach Bank of Mum and Dad arrangements with caution. This is because they involve:
complex legal considerations
multiple parties
potential future disputes
significant financial consequences
Properly documenting and advising on these arrangements requires careful attention to detail.
But when done correctly, it provides clarity, reduces risk, and supports stronger outcomes for everyone involved.
Supporting Your Children — Without Creating Future Issues
Helping your children buy property is often one of the most generous and meaningful things you can do.
For many families, it represents not just financial support, but a desire to create stability and opportunity.
But generosity alone is not enough.
Without the right legal framework, even the most well-intentioned arrangements can lead to unintended outcomes.
The goal is not to make things complicated.
It is to make things clear.
A Balanced Approach
The rise of the Bank of Mum and Dad reflects the realities of today’s property market.
It also highlights the importance of approaching these arrangements thoughtfully.
Whether you are considering providing a gift, structuring a loan, or simply exploring your options, the key is to understand:
the risks
the legal implications
and the steps available to protect everyone involved
With the right advice, families can move forward with confidence — knowing that their arrangements are clear, considered, and aligned with their intentions.
Final Thoughts
Buying property is rarely just a financial transaction.
It is often a deeply personal milestone, particularly when family support is involved.
The Bank of Mum and Dad can open doors that might otherwise remain closed.
But like any financial arrangement, it benefits from structure, clarity, and foresight.
Taking the time to get it right at the beginning can prevent uncertainty later and help ensure that what starts as support remains exactly that.
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