Can’t Save a Deposit? Here’s How Your Parents Might Help You Buy a Home
Be Nice to Your Parents—They Might Just Help You Get a Home Loan
Saving for a home deposit in today’s market can feel like climbing Everest in thongs. But if you’re lucky enough to have supportive parents, relatives, or even close friends, there are a few ways they might help you get into the property market sooner—and potentially save you thousands in Lenders Mortgage Insurance (LMI).
Let’s explore the three most common types of financial help: gifts, loans, and guarantees.
1. Parental Gifts – The Deposit You Don’t Have to Repay
What Is a Gifted Deposit?
A gifted deposit is exactly what it sounds like—money given to you by a parent or relative to help you buy a home, with no expectation of repayment. It’s the most generous form of help, and it can significantly boost your borrowing power.
Why Documentation Matters
Even if it’s a gift, your lender will want proof. Without a signed gift declaration, the bank may treat it as a loan, which could reduce your borrowing capacity. A simple letter confirming the funds are a gift and not expected to be repaid is usually sufficient.
2. Parental Loans – A Helping Hand (With Strings Attached)
How It Works
If your parents are willing to lend you money for a deposit—but expect it to be repaid—this is considered a private loan. It can still be a huge help, especially if they offer a low or no-interest arrangement.
Why You Still Need a Loan Agreement
Even though it’s family, it’s important to document the terms of the loan. Lenders will want to know:
- The repayment schedule
- Whether interest is charged
- If the loan is subordinate to the mortgage
This helps them accurately assess your borrowing capacity and risk profile.
3. Parental Guarantees – Using Equity Instead of Cash
What Is a Guarantor Loan?
If your parents don’t have spare cash but do own their home, they may be able to act as a guarantor. This means they use the equity in their property as security for your loan—often covering the deposit so you can borrow up to 100% of the purchase price without paying LMI.
What Parents Should Know
Going guarantor is a big commitment. It can:
- Affect their borrowing capacity
- Put their home at risk if you default
- Impact their retirement plans
That’s why it’s crucial to get independent legal and financial advice before proceeding.
To learn more, check out another blog on guarantor support
Need Help Navigating Family Support Options?
At CBM Mortgages, we help first-home buyers explore all their options—from gifted deposits to guarantor loans. We’ll guide you through the paperwork, assess your borrowing power, and help you avoid common pitfalls.
Call us today on 02 8068 0534 or get in touch online to start your homeownership journey.
Further Reading:
- First Home Buyer Grants – Revenue NSW
- Family Home Guarantee – Housing Australia
- Can your profession save you money on a home loan
- Looking for a Mortgage broker in Bondi
Disclaimer:
The information provided in this article is for general guidance only and does not constitute financial or legal advice. It does not consider your personal circumstances. Before making any financial decisions, seek professional advice from a licensed mortgage broker or financial consultant. This content is protected by copyright laws and may not be modified, reproduced, or republished without prior written consent.
Written by Craig McDonald 15/06/2025
