This is an option where you lend money, for your children to put towards buying a property.
As with any loan, you need to have a discussion and agree on how the loan will work.
Some questions for you all to consider discussing with your kids are:
- Is it an interest-free loan or will there be interest payable on it?
- When is the loan due for repayment? On the sale of the property?
- Can you have input into the type of home they buy, or is it a hands-off loan?
Once you’ve agreed on how it will work, you as the parents or the family member providing the loan will need a lawyer to draft a Deed of Acknowledgment. This will set out the terms of the loan, including repayment details.
This is similar to a family loan, but a gift does not need to be repaid and therefore is not subject to any interest.
A gifting certificate will need to be provided. We've attached a template for you below should you need one.
This document states the amount of the gift, who is providing it and who will receive it. It also confirms that there’s no expectation for repayment of the gift amount in the future.
Acting as guarantor
You may choose to act as a guarantor.
As a guarantor, you typically offer your assets (generally your own house) as collateral for your kids home loan. It’s a way for you to help your kids get into the property market, without having to loan or gift significant equity.
However, the risk for a guarantor is that if your kids can’t meet their loan repayments and terms, you’ll be on the hook for that loan instead. This could have serious implications for you, including the loss of your own property.