A recent Court of Appeal ruling confirmed something a lot of Kiwi families don't think about until it's too late: 

Money from parents is legally assumed to be a gift, not a loan, unless there's clear evidence proving otherwise from the start ([_read our jargon-free breakdown of the case here_](https://tella.co.nz/blog/is-a-gifted-deposit-a-loan-in-nz-court-confirms-no)).

If family money is part of how you're funding your next home or an investment property, here's how to make sure everyone's protected, and nobody's left guessing later.

## 1. Decide properly, whether it's a gift or a loan
This sounds obvious, but it's the step most families skip. 

A quick chat over dinner isn't evidence. If the money is meant to be repaid, or your parents want an ongoing interest in the property, that needs to be a clear, documented decision.

<div class="badge-action-box">
  <div class="action-badge">✅ DO THIS</div>
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    Have the actual conversation, out loud, with everyone involved. Agree on what it is before the money moves, not after.
  </p>
</div>

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## 2. Put it in writing, even if it feels awkward
If it's a loan, get a simple loan agreement drawn up: amount, repayment terms (if any), interest (if any), and what happens if plans change, for example, if the property is sold or refinanced.

If it's a gift, a short gifting letter can still be useful, particularly if a bank needs to see where your deposit came from.

<div class="badge-action-box">
  <div class="action-badge">✅ DO THIS</div>
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    Ask a lawyer for a basic deed or loan agreement template. It doesn't need to be complicated, but it does need to exist.
  </p>
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## 3. Think about what happens to the property, not just the money
If parents are contributing toward an investment property or your next home, think about what happens down the track: if the property is sold, if you separate from a partner, or if your parents later need the money back for their own retirement.

<div class="badge-action-box">
  <div class="action-badge">✅ DO THIS</div>
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    Talk through a few "what if" scenarios with your family and our adviser before you commit.
  </p>
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## 4. Keep a paper trail
Bank transfers with a clear reference, dated agreements, and any related correspondence all help establish intent if it's ever questioned later, whether that's by a bank, a lawyer, or in the worst case, a court.

<div class="badge-action-box">
  <div class="action-badge">✅ DO THIS</div>
  <p class="action-content">
    Avoid cash. Use a bank transfer with a clear description and keep a copy of any agreement somewhere both parties can access.
  </p>
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## 5. Loop in your mortgage adviser early, not after the offer's in
Lenders look at gifted or family-sourced deposits differently, and how the money is structured can affect your loan options, your equity position, and how your finances are assessed. 

This matters even more if you already own property and are structuring your next purchase around existing lending.

<div class="badge-action-box">
  <div class="action-badge">✅ DO THIS</div>
  <p class="action-content">
    Have this conversation with our adviser before you start looking, not once you've found the place.
  </p>
</div>

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<div style="border: 1px solid #ddd; padding: 30px; background-color: #10059f; font-family: Arial, sans-serif; margin-bottom: 40px; color: #ffffff; border-radius: 8px;">
  <h3 style="margin-top: 0; color: #ffffff; font-size: 22px;">Using family money for your next move?</h3>
  
  <p style="color: #ffffff; margin-top: 0; margin-bottom: 15px; line-height: 1.5;">
    Talk to us before the money moves. We'll walk you through what to put in writing so everyone's covered.
  </p>
  
  
  <a href="https://calendly.com/tella-adviser" 
     style="background-color: #ffffff; color: #10059f; padding: 14px 28px; border-radius: 50px; font-weight: bold; text-decoration: none; display: inline-block; font-size: 16px;">
    Book a quick strategy chat with our home loan adviser
  </a>
</div>

<hr style="border: none; border-top: 2px solid black; height: 1px; width: 100%; display: block !important; visibility: visible !important; margin-top: 40px;">

<p style="font-style: italic; font-size: 0.85em; color: #555;">
  This article is for informational purposes only. It does not consider your personal financial situation or objectives. Please consult with Tella mortgage and financial experts before making any decisions regarding your mortgage or debt strategy.
</p>

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Using Family Money for Your Next Home or Investment Property? Don’t Skip These 5 Steps.

Andrew shared his thoughts on a shift a lot of Kiwi families are quietly living through: adult kids sticking around at home much longer than previous generations did.

He spoke candidly as a parent, not just an industry expert. With two adult kids of his own, he's seen firsthand how different the path to a first home looks today compared to when he was their age, even for kids who've done everything 'right'. 

Andrew speaks from experience too—his own generation has felt squeezed from both sides, facing a very different economic reality than those before and after them.

**His broader thought?**

We might be heading toward a future where community living and multigenerational households become far more common. Not as a fallback, but as a genuine, lasting way families choose to support each other, in both directions, over time.

It's a good reminder that the housing conversation isn't just numbers and mortgage rates—it's about how Kiwi whānau are adapting, together.

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_**For the full story and Andrew's comments in context, check out the OneRoof feature linked [here](https://www.oneroof.co.nz/news/what-if-the-kids-never-move-out-experts-say-kiwi-families-should-prepare-for-housing-shake-up-49904).**_


<div style="border: 1px solid #ddd; padding: 30px; background-color: #10059f; font-family: Arial, sans-serif; margin-bottom: 40px; color: #ffffff; border-radius: 8px;">
  <h3 style="margin-top: 0; color: #ffffff; font-size: 22px;">Thinking about financing a granny flat, renovation, or extra space for the family?</h3>
  
  <p style="color: #ffffff; margin-top: 0; margin-bottom: 15px; line-height: 1.5;">
    Let's talk through your options.
  </p>
  
  
  <a href="https://calendly.com/tella-adviser" 
     style="background-color: #ffffff; color: #10059f; padding: 14px 28px; border-radius: 50px; font-weight: bold; text-decoration: none; display: inline-block; font-size: 16px;">
    Book a free, no-pressure chat with our home loan adviser.
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Multigenerational Living in NZ: Tella CEO Shares His Story

_**Please Note:** This newsletter was originally published on 23rd September 2023. While the information presented here may still be valuable, some aspects may be outdated._


<br>
If you or your children face challenges securing a first home, you're not alone. High prices and slow savings can make owning a home seem like an elusive goal, especially for those going it alone. But having a supportive parent or family member can make this dream a reality.

This is your resource for understanding ways to achieve home ownership together. From family loans to gifts and guarantor roles, we're here to guide you. Our goal is to equip you to confidently extend a helping hand, guiding loved ones on their exciting path to owning a home.

And here's encouraging news: Over half of first-time homebuyers today receive family financial support. Yes, the Bank of Mum and Dad often steps in to make this happen. This support takes various forms, like loans, gifts, or being a guarantor.

Remember, it's not just parents – close family members can help too. Let's explore these possibilities and what you need to know.

**Family Loans: Defining the Terms**

Imagine a scenario where parents or family members lend money to a loved one to go towards their first home. It's a loan, and like any loan, there's an understanding it'll be repaid at some point. But before you dive in, it's important to have an open conversation and set clear terms. Questions to ponder include:
- Is there any interest on the loan, or is it interest-free?
- When is the loan due for repayment? Is it when the property is sold?
- Will the family members lending the money have a say in the type of property bought, or is it a hands-off arrangement?

Once you're on the same page, it's recommended for those providing the loan to consult their lawyer and draft a Deed of Acknowledgment.  This document outlines the loan's terms, including repayment specifics.

**Gifts: Support with No Strings Attached**

Similar to a family loan, a gift involves a sum of money provided by family members, with no catches: it doesn't need to be paid back, and no interest is applied or payments made. 

When applying for a home loan, a gifting certificate is required. This certificate states the gift amount, the giver, and importantly, that it's non-interest bearing and there won't be an encumbrance on the title.  An encumbrance is a note on the property title showing who is owed money - the most common of which is a bank's mortgage.

However, be aware that under certain circumstances, the courts might consider the gifted money as "relationship property," especially in case of a relationship separation.  To navigate this, we recommend you seek legal advice. 

**Guarantor Support: Sharing the Risk**

Another approach is having parents or family members act as guarantors.

In this setup, they use their own assets – often their house – as security for the first home buyers home loan. This enables them to enter the property market without needing significant cash upfront in the form of a loan or gift. Typically, the guarantee covers the amount needed to get to the crucial 20% deposit, so it's only a portion of their property's overall value that is used. This specific portion is set up as a separate loan to be repaid faster.

Remember that if the home owner struggles with repayments, the guarantor will likely become responsible for the loan. Because of this risk, the bank will also assess the guarantor to ensure they have sufficient income to meet the repayments if needed.
<br>
As always, it's important for both parties to seek separate independent legal advice before proceeding with a guarantor arrangement to fully understand the potential risks and long term implications, such as what happens if the parents/guarantors want to sell their home and there is still a loan in place. 

Whether it's a family loan, a gift, or a guarantor arrangement, clear communication, transparency, and legal guidance are key.

Should you be considering the Bank of Mum and Dad as a means of homeownership support, [book a free, no obligation, chat](https://calendly.com/tella-advisors/home-loan-expert-chat?). Our Tella mortgage experts are here to help you navigate this exciting journey.

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Bank of Mum and Dad: Another Path to Homeownership

If you or your children face challenges securing a first home, you're not alone. High prices and slow savings can make owning a home seem like an elusive goal, especially for those going it alone. But having a supportive parent or family member can make this dream a reality.

This newsletter is your resource for understanding ways to achieve home ownership together. From family loans to gifts and guarantor roles, we're here to guide you. Our goal is to equip you to confidently extend a helping hand, guiding loved ones on their exciting path to owning a home.

And here's encouraging news: Over half of first-time homebuyers today receive family financial support. Yes, the Bank of Mum and Dad often steps in to make this happen. This support takes various forms, like loans, gifts, or being a guarantor.

Remember, it's not just parents – close family members can help too. Let's explore these possibilities and what you need to know.

Family Loans: Defining the Terms

Imagine a scenario where parents or family members lend money to a loved one to go towards their first home. It's a loan, and like any loan, there's an understanding it'll be repaid at some point. But before you dive in, it's important to have an open conversation and set clear terms. Questions to ponder include:
Is there any interest on the loan, or is it interest-free?
When is the loan due for repayment? Is it when the property is sold?
Will the family members lending the money have a say in the type of property bought, or is it a hands-off arrangement?
Once you're on the same page, it's recommended for those providing the loan to consult their lawyer and draft a Deed of Acknowledgment.  This document outlines the loan's terms, including repayment specifics.

Gifts: Support with No Strings Attached

Similar to a family loan, a gift involves a sum of money provided by family members, with no catches: it doesn't need to be paid back, and no interest is applied or payments made. 

When applying for a home loan, a gifting certificate is required. This certificate states the gift amount, the giver, and importantly, that it's non-interest bearing and there won't be an encumbrance on the title.  An encumbrance is a note on the property title showing who is owed money - the most common of which is a bank's mortgage.

However, be aware that under certain circumstances, the courts might consider the gifted money as "relationship property," especially in case of a relationship separation.  To navigate this, we recommend you seek legal advice. 

Guarantor Support: Sharing the Risk

Another approach is having parents or family members act as guarantors.

In this setup, they use their own assets – often their house – as security for the first home buyers home loan. This enables them to enter the property market without needing significant cash upfront in the form of a loan or gift. Typically, the guarantee covers the amount needed to get to the crucial 20% deposit, so it's only a portion of their property's overall value that is used. This specific portion is set up as a separate loan to be repaid faster.

Remember that if the home owner struggles with repayments, the guarantor will likely become responsible for the loan. Because of this risk, the bank will also assess the guarantor to ensure they have sufficient income to meet the repayments if needed.

As always, it's important for both parties to seek separate independent legal advice before proceeding with a guarantor arrangement to fully understand the potential risks and long term implications, such as what happens if the parents/guarantors want to sell their home and there is still a loan in place. 


Whether it's a family loan, a gift, or a guarantor arrangement, clear communication, transparency, and legal guidance are key.

Should you be considering the Bank of Mum and Dad as a means of homeownership support, don't hesitate to reach out here. Our Tella mortgage experts are here to help you navigate this exciting journey.

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Bank of mum and dad