How to Help Your Kids Buy a Home (and Protect the Money if It Goes Wrong)

Updated on

By Harry Moustakas, Managing Director & Senior Financial Adviser; Dennis Spiroski, Senior Financial Adviser; and George Rentzepis, Director of Lending

Quick Summary: You can absolutely help your kids buy their first home. The trick is how you hand the money over. A documented family loan protects your money far better than a gift if your child’s relationship ends down the track. And before you give a cent, sort out your own retirement and the Centrelink gifting rules first, so a kind gesture today doesn’t cost you later.

“We want to help our son buy a house. But what if he gets divorced and we lose that money?”

We hear a version of that sentence almost every week. A mum and dad, proud of the kids, wanting to give them a leg up into a brutal property market. And right behind the generosity sits a quiet worry about what happens if things don’t work out.

It’s a fair worry. So let’s talk about how to help in a way that actually helps, without leaving yourself, or that money, exposed.

You’re Not Alone (The Bank of Mum and Dad Is Now Huge)

If you’re thinking about chipping in, you’ve got plenty of company. The “Bank of Mum and Dad” has quietly become one of Australia’s biggest home lenders, tipping in around $35 billion a year and helping a big chunk of first-home buyers get a foot in the door.

It’s not hard to see why. A 20% deposit on a median Australian home now sits around $195,000, up more than $66,000 in just five years. For a lot of young buyers, that gap is simply too big to close on their own.

So the instinct to help is a good one. The question is how you do it.

First Things First: Protect Yourself (Harry’s Rule)

Before we talk about loan structures and lending, here’s the most important thing I tell every parent.

Put your own oxygen mask on first.

Make sure you are financially strong so you can better help your kids. Look at your own future for the next 30-odd years before you give anything away. Are you going to be fine? Is your retirement plan solid? Because the last thing you want is to go back to your kids in 20 years and say, “We need some of that money back.”

There’s a big difference between helping with an asset and subsidising a lifestyle. A home deposit builds long-term wealth. Covering rent, car payments and credit cards just builds dependency. Help with the asset.

You can be generous and sensible. The two aren’t enemies. You just need to help from a position of strength. Our financial planning team can model exactly how much you can give without putting your own plans at risk.

The Finance Options: How to Actually Help (George’s Lane)

There’s no single right way to help your child get on the property ladder. Here are the main options we set up for families, and the trade-offs with each.

1. Gift the deposit

The simplest path. You give them cash for the deposit and they borrow the rest in their own name. Clean and quick. The downside is protection, which we’ll get to shortly, plus the Centrelink rules Dennis covers below.

2. A properly structured family loan

Instead of giving the money, you lend it with real terms. This keeps a sense of responsibility for your child and, done correctly, it’s the single best way to protect your money if a relationship later breaks down.

A proper family loan should have:

  • A written agreement drafted by an independent lawyer
  • Clear repayment terms at the interest rate you determine and a schedule, not “pay us back whenever”
  • The option of security, such as a mortgage or caveat over the property
  • A record of repayments actually being made

3. Going guarantor (the family pledge)

Rather than handing over cash, you use the equity in your own home as security so your child can borrow without a 20% deposit and skip Lenders Mortgage Insurance. Your capital stays where it is. The catch is real: if your child can’t make repayments, you’re on the hook. Go in with eyes open.

4. Releasing equity from your own home

If most of your wealth sits in your home, you can refinance or set up a line of credit and lend that money on. Sometimes the low rate on your home loan makes this cheaper than the alternatives. It also adds debt in your name, so it needs to fit your bigger picture.

5. The government’s 5% deposit scheme

Sometimes the best help isn’t your money at all. Since October 2025, the Australian Government’s 5% Deposit Scheme has been open to all first-home buyers with no cap on places, letting them buy with as little as 5% down and no LMI. For some families, this changes the conversation entirely.

One important heads-up. A family loan can affect how much your child can borrow from the bank, because lenders may count it as a debt. It’s worth getting the lending structure right before they go shopping for a mortgage, not after.

Gift or Loan? Why the Paperwork Is Everything

Here’s the part most parents don’t see coming. And it’s the answer to that opening question about divorce.

In the eyes of the law, when a parent gives money to a child, it’s presumed to be a gift. Lawyers call it the “presumption of advancement.” That means if your child separates and you claim the $300,000 was actually a loan, the onus is on you to prove it. A handshake and good intentions won’t cut it.

Why does that matter so much? Because gifts and loans are treated very differently when a couple splits:

  • A gift generally gets counted as a contribution your child made to the relationship, and can be swept into the pool of assets to be divided. Some of your money can end up with the ex-partner.
  • A documented loan is treated like any other debt. It gets repaid to you first, off the top, before the remaining assets are divided.

In one real case, a father who lent his son $320,000 with a written loan agreement had the full amount treated as a genuine debt and repaid before anything was divided. Without that paperwork, courts have repeatedly ruled the money was a gift, and it stayed in the pool.

One more thing people miss: your kids don’t need to be married for this to matter. De facto partners who’ve lived together for a couple of years can have a claim too. The relationship doesn’t need a certificate to create a risk to your money.

This is the hard conversation. It’s not comfortable to plan for your child’s relationship ending. But it’s a far better conversation to have now, calmly, than in the middle of a separation when it’s too late to fix.

The team you need around you

Navigate isn’t a law firm, and we’d never pretend to be. What we do is bring the right people to the table. When you’re handing over serious money, you want:

  • A loan agreement drafted by a lawyer, structured to stand up if it’s ever tested
  • A Binding Financial Agreement (the “pre-nup” or “post-nup”) for your child and their partner, where appropriate
  • Your wills and enduring powers of attorney updated to match, for both you and your child

We coordinate your financial plan with our accounting team and trusted legal partners so all of it lines up. That’s the whole point of having one team rather than five disconnected advisers.

Don’t Forget Your Own Retirement and Centrelink (Dennis’s Lane)

I work with people at or near retirement every day, and this is exactly the age when the “help the kids” question lands. So here’s what I want you to know before you gift a dollar.

Giving money away can quietly affect your Age Pension. Centrelink has gifting limits: you can give away up to $10,000 in a financial year, and no more than $30,000 over five years. Go over that, and the excess is treated as a “deprived asset” for five years, counted as if you still had it. It can reduce your pension even though the money is gone.

It flows into aged care too. The same deprivation rules feed into aged care means testing, so a big gift today can lift your aged care costs years from now.

Here’s the silver lining, and it ties back to George’s point: a properly documented loan is assessed differently from a gift by Centrelink, because it’s still technically your asset. Yet another reason the loan-versus-gift decision matters.

And the bigger picture stays the same. Aged care is expensive, and you may well need that money in 15 or 20 years. Plan your own runway first, then decide what you can comfortably give. This is the heart of what we do in pre-retirement and aged care planning.

The Best First Gift Might Not Be Money

One last idea, and it might be the most valuable one.

Financial literacy among young Australians is, frankly, pretty poor. We teach kids a lot at school, but not nearly enough about how to handle money. So a lot of young adults are underprepared for a big lump sum landing in their lap.

So before you write the cheque, consider gifting something else first: a session with a financial adviser. Bring them into a meeting with you. Or pay for an education session of their own. Help them understand debt, budgeting and how to protect what they’re about to receive.

Sometimes the smartest thing you can hand your kids isn’t $300,000. It’s the knowledge to look after it. Do that, and the money you give later goes a lot further.

When It Makes Sense for Your Great Life

Helping your children into a home is one of the genuine privileges of having built something. The goal isn’t to do it nervously, or to not do it at all. The goal is to do it well: structured properly, protected sensibly, and lined up with your own plan.

Because when your whole financial world makes sense, including how you help the people you love, you get the freedom to say “yes” to the choices that matter most. That’s what living Your Great Life looks like.

Ready to help your kids the smart way?

Helping your children into a home is a wonderful thing to do, as long as you protect the money and yourself in the process. Let’s work out how much you can comfortably give, and how to structure it so it’s safe.

Book a 15-minute introductory chat at navigateadvisory.com.au/contact.

Navigate Advisory has offices in Balmain, Brighton-Le-Sands and Hurlstone Park.

General Advice Warning: This article is general information only and does not take into account your objectives, financial situation or needs. It does not represent legal, tax or personal advice and should not be relied on as such. Please seek advice relevant to your circumstances before making any decisions.

Frequently Asked Questions

Possibly, yes. If the money was a gift, courts often count it as a contribution that can be divided in a separation, and some of it can end up with the ex-partner. A documented loan is far safer, because it’s treated as a debt repaid to you before assets are split. This applies to de facto partners too, not just married couples.

For protection, a documented loan usually wins. The law presumes money from a parent is a gift unless you can prove otherwise, and a proper loan agreement is that proof. A loan can be repaid to you first if your child separates, and it’s also treated more favourably under Centrelink rules. A gift is simpler but offers little protection once it’s handed over.

You can gift up to $10,000 in a single financial year, and no more than $30,000 over five years, without it affecting your Age Pension. Anything above those limits is treated as a “deprived asset” by Centrelink for five years and can still reduce your pension. The same rules can flow through to aged care costs.

A valid family loan needs a written agreement, ideally drafted by an independent lawyer, with clear repayment terms and a schedule. There should be genuine repayments being made, and for larger amounts, security such as a mortgage or caveat over the property. Informal notes or verbal agreements often fail to satisfy a court.

Yes. De facto partners who have lived together for a couple of years can have a claim over assets if the relationship ends. A marriage certificate isn’t required for your money to be at risk, which is why documentation matters regardless of your child’s relationship status.

Going guarantor can help your child borrow without a full deposit and avoid Lenders Mortgage Insurance, using your home’s equity as security. The risk is that if your child can’t make repayments, you become responsible for the debt. It’s a powerful option, but only with a clear understanding of the downside and the right structure in place.

Absolutely. You can go guarantor, help them access the government’s 5% deposit scheme, or pay for financial advice so they’re ready to manage money well. Sometimes the most valuable gift is education, not a lump sum, especially for young adults who haven’t handled a large amount before.

Ideally both, working together. A financial adviser models what you can afford to give and how it affects your retirement and Centrelink position, while a lawyer drafts the loan agreement, Binding Financial Agreement and updated wills. Coordinating the two is exactly the kind of thing we manage for families at Navigate.

Any advice provided in this article is general advice only and does not take into account the objectives, financial situation or needs of any particular person. It does not represent legal, tax, or personal advice and should not be relied on as such. You should obtain financial advice relevant to your circumstances before making any decisions.