‘The Bank of Mum and Dad’: Children borrowing from Parents


So, your parents have agreed to give you and your partner a loan to help you buy your first home – great! But what do you need to be aware of to protect yourselves? 

Is it a loan or a gift? 
Firstly, is mum and dad’s cash injection going to be a loan or a gift? If it is going to be a loan, then your parents may want to own a share in the property. If you are also borrowing from a bank, the bank may ask for a guarantee from mum and dad over the amount you are borrowing. Your bank will be able to clarify their requirements further. 

It is important that a Property Sharing Agreement be prepared to record everyone’s expectations of the ownership of the property. We can help you with this. 

Who holds the loan or debt?
Secondly, if mum and dad are gifting the funds to you, then you all need to decide whether the loan or debt is going to be a joint debt between you and your partner, or a gift or debt to their child only. It is important that you discuss what will happen to the debt or loan in the event of a separation or death. 

With the right advice and clear documentation, a loan from the ‘Bank of Mum and Dad’ can be a no-fuss way to get into the property market. 

See also: HomeStart Grants - Who is eligible and what are the benefits for KiwiSavers?

If you would like to discuss any matters relating to loans and gifting for property purchase, or any other property law related matter, please contact our property law specialist, Wade Hansen on 09 836 6885, or at wade.hansen@smithpartners.co.nz

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