Want to help your kids buy a house? Start here

March 29, 2026 — 2:00am

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Most of us are familiar with Australia’s banking oligopoly, where the big four – ANZ, CBA, Westpac and NAB – take up the lion’s share of the market for Australian bank accounts, mortgage lending, and three-letter acronyms.

What you may be less aware of (or acutely aware of, depending on your age), is that there’s one more major lender that you won’t find on the boards of the ASX or at your local shopping centre. That’s the bank of mum and dad, resplendent with its own acronym: BOMAD.

This “bank” – calculated in 2020 to be the fifth-biggest lender in the country – doesn’t come with APRA-enforced regulations or strict responsible lending requirements. In fact, it comes with almost no rule book at all, which, with 60 per cent of first homeowners receiving help from their parents, is problematic to say the least.

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Parents, many of whom lived in the halcyon days of $500 townhouses or however cheap they were (do NOT email me about this!), are helping their children out of a sense of obligation, guilt, or both. And as those children get older and start thinking about how they might help their own children, it’s a cycle likely to continue (unless houses get really cheap, and we all know that’s not going to happen).

But this lending can pose problems. A recent study from Aware Super found almost all parents (98 per cent) are willing to provide financial support to a younger family member, and 31 per cent had already done so.

But it also found the majority of these loans were informal and unstructured, with little thought given to tax implications, estate disputes or impacts on retirement savings.

What you can do about it

So if you’re a parent thinking of opening up a BOMAD branch, how should you run it? Here are some things to think about before issuing your first loan:

Can you afford it? Before you go giving out gifts to your offspring, sit down and look at your own situation first. Yes, you may feel compelled to help your children out, but there’s no point in doing so if it compromises your own situation – both now and in retirement. “Look carefully at your retirement income and savings, as well as any potential unplanned costs like health and aged-care costs that you may need to take care of,” says Aware Super chief Deanne Stewart. As you get older, it can also be harder to secure a loan or credit card for yourself, so significantly diminishing your savings to help your kids could put you in a tough spot if you find yourself needing cash later on. “Couple this with the fact that once your money leaves super or savings, rebuilding your savings in your later years can be genuinely difficult,” Stewart says. Do some calculations on what you expect your retirement income to be, and think about any major expenses that might pop up in the years to come. If your loan requires you to significantly diminish your savings, or cut back on your own expenses, then it might be best to rethink it.

Can they afford it? This is an often overlooked part of the process, but giving your kids money for a home isn’t some sort of panacea that fixes all their financial woes. They will still be saddled with, likely, a significant mortgage that may be more than the rent they’ve been paying previously. What happens if they lose their job, or interest rates keep rising (as they’re slated to this year)? War-gaming this is a key part of the puzzle, and if it starts to look a little risky, it might be back to the drawing board.

Decide what form it will take: Should it be a gift or a loan? Maybe you should be a guarantor instead? The choice you make is important, and specific to your family situation, but whatever it is, make sure you’re clear on it early, says Brett Sutton, mortgage broker at Two Red Shoes. “Gifting money is usually the cleanest from a lending point of view. Lenders will want a declaration confirming it’s a genuine gift and not repayable, which helps protect borrowing capacity,” he says. “Lending money can actually reduce borrowing power if repayments are expected, so it doesn’t always achieve what people think it will. Acting as a guarantor can be really effective where the issue is a deposit.” Sutton says he’s also seeing an increase in the number of parents opting for the shared equity path, where they contribute funds and own a portion of the property, which he describes as a good middle ground. He also suggests that for some parents, simply letting your children live at home rent-free can accelerate your kids’ savings massively without you taking on much risk, though it requires clear guidelines and timeframes.

Document it, and get advice: Documentation is something that often falls by the wayside, but is more important than ever, Sutton says. Clear documentation of the nature of the agreement – be it a loan, gift, or whatever – is critical for protecting both you and your child. Stewart goes one further, suggesting input from a family lawyer could be suitable, especially when it comes to more complex situations such as guarantor agreements. “If your child is in a relationship and later separates, there’s a chance the money can be lost with the ex-partner benefiting,” she says. “Good advice can help you get that first home loan properly structured and documented from day one to avoid any potential future heartbreak.”

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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