Buying your first home is exciting but rising property prices and strict lending criteria can make it challenging to get your foot in the door. Thankfully, family assistance can make a big difference.
At Pinpoint Finance, we work with families to find the right structure that suits both the buyer and the people helping them. Here’s a general overview of the different ways families can assist from gifts to guarantees.
For personalised advice, contact us at info@pinpointfinance.com.au.
1. Gift from Family
A gift is a non-repayable financial contribution from a family member to the buyer.
Requirements:
- A Statutory Declaration (signed by a Justice of the Peace) confirming it is a true gift, not a loan.
Example:
“I have gifted [Name] $100,000. This is not a loan, is not repayable, and is non-refundable.” - The gifter must show evidence of available funds, usually via bank statements.
Benefits:
- Simple and straightforward.
- Lenders don’t include it in loan servicing calculations.
Disadvantages:
- The purchaser still needs to show genuine savings.
- Once gifted, the funds legally belong to the purchaser ; there’s no recourse.
- Can complicate future relationship property splits (e.g. marriage or de facto).
2. Loan from Family
A family loan can be structured in two ways:
a) Term Loan (Repayable Regularly)
- The borrower makes agreed repayments (monthly or at set intervals).
- May or may not include interest.
Benefits:
- Families can retain the value of their savings.
- Repayable funds can help protect family equity.
Disadvantages:
- Lenders treat this like a personal loan, adding to loan serviceability calculations.
- A higher assumed interest rate is often applied in the assessment.
b) Repayable on Sale
- No repayments during the loan term.
- Repaid only when the property is sold.
- Documented legally and secured by caveat (not first mortgage).
Benefits:
- Protects family funds from potential relationship disputes.
- Minimises immediate cashflow impact.
Disadvantages:
- Not accepted by all lenders.
- The overall application must be strong in other areas (e.g. income, deposit, credit).
3. Family Equity Pledge (Limited Guarantee)
A Family Pledge Loan allows a family member (usually a parent) to offer part of their own property’s equity as a guarantee for the buyer’s loan — helping to avoid a deposit shortfall.
Benefits:
- Borrow up to 100% of purchase price, plus costs like stamp duty.
- Helps avoid Lenders Mortgage Insurance (LMI).
- Great for buyers with strong income but limited savings.
Disadvantages:
- A mortgage is taken over the family property.
- The guarantor must get independent legal and financial advice.
- The guarantor is liable for the guaranteed amount if there’s a shortfall after sale.
4. Family as Co-Borrowers
Family members can become co-borrowers on the loan — meaning they’ll also be on the property title.
Benefits:
- All incomes and liabilities are considered in the loan assessment.
- May increase borrowing power.
Disadvantages:
- First Home Owner Grant (FHOG) may be lost if parents are not eligible.
- Parents also lose eligibility for any future first home benefits.
Not Available: Family as Income Guarantors
Some families hope to help by guaranteeing income only (without being on title or offering security). However, Australian lenders do not currently accept this structure.
Want to Explore Family Support Options?
We’ll help you assess which path works best for your family; whether gifting, lending, pledging equity, or co-borrowing.
Reach out to us at info@pinpointfinance.com.au for expert guidance.
Related Topics
- Pre-Approved Loans – Understand what lenders assess before approval.
- Sale & Purchase Process – Plan your settlement and timeline.
- Offset Accounts – Learn how to structure your home loan effectively.
- Standard Supporting Documents (Purchase) – Be ready for your next loan application.