It’s a financial lifeline for thousands of young Australians, but new research shows the vast majority of ‘Bank of Mum and Dad’ deals are happening without a shred of formal paperwork, leaving families exposed to devastating financial and legal battles.
A nationally representative survey by Money.com.au reveals a staggering 64 per cent of first-home buyers receiving parental financial support are relying on nothing more than a verbal ‘handshake’ or, even worse, no agreement at all.
This contrasts sharply with just 36 per cent who had a legally binding written agreement.
Nick Burgess, Mortgage Expert at Money.com.au, says family support can be invaluable, but it’s important to document the arrangement clearly from the outset.
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Maria and Vincenco Anello and two of the their four children, Catia and Sebastian. Photo: David Kelly
“Property prices have become so expensive that many first-home buyers can’t buy a home
without the Bank of Mum and Dad. But when tens or even hundreds of thousands of dollars
are being lent, gifted or secured against the family home, relying on a verbal understanding
can create problems later on,” he says.
“For example, I’ve seen family disputes emerge years after a property purchase because
there was never a clear agreement about whether the deposit was intended for their child
alone or for the couple jointly.
“Things also get complicated when parents have guaranteed part of the loan and the relationship later breaks down. In some cases, lawyers need to get involved, and what started as a generous gesture can turn sour for everyone involved.”
Source: Money.com.au
One common flashpoint is whether the money is a gift or a loan.
Lenders usually ask for a letter confirming this during the mortgage assessment, but Burgess warned a lender letter isn’t a proper family agreement.
It won’t spell out what happens if the property is sold, the couple separates, or family dynamics change.
He urged families to consider a separate agreement that clearly sets expectations and responsibilities.
What formal agreements cover
For the minority of first-home buyers who did have a formal agreement, nearly half (46 per cent) explicitly covered whether the parental contribution was a genuine cash gift or a loan requiring repayment.
Around 39 per cent outlined the fate of the family contribution in the event of a separation or relationship breakdown, while 23 per cent addressed whether the Bank of Mum and Dad would need to be repaid if the property was sold.
Only 14 per cent included details regarding ownership rights or equity share arrangements, such as whether contributing parents would hold a financial interest in the home.
Source: Money.com.au
Growing reliance on parental support
The research also underscored the increasing reliance of younger Australians on parental financial assistance to enter the property market.
More than one in five Australians (21 per cent) received financial support from parents or family for their first home, including cash gifts, loans, or guarantor support.
Gen Z homebuyers were by far the most likely to receive family assistance, with 76 per cent benefiting from parental or family contributions.
Cash gifts were the predominant form of assistance, received by 39 per cent of Gen Z.
Millennials followed, with 38 per cent receiving help from the Bank of Mum and Dad, and cash gifts again being the most common form of support (22 per cent).
This rate declined significantly among older generations, with 18 per cent of Gen X and just 8 per cent of Baby Boomers receiving financial support for their first home purchase.
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