The Bank of Mum and Dad has become one of the most common ways first home buyers are getting into the property market. With rising property prices making it harder to save a deposit, many buyers are turning to parents or family members for financial support. Whether that assistance comes as a gift, loan, guarantor arrangement, or early inheritance, having a written agreement in place can help avoid confusion, satisfy lender requirements, and make the home loan process smoother.
Bank of Mum and Dad Support Is Helping More First Home Buyers
For many Australians, buying a first home feels further out of reach than ever before. Property prices, living costs, and interest rates have made it increasingly difficult to save a substantial deposit while managing everyday expenses.
As a result, the Bank of Mum and Dad has become a major source of financial support for first home buyers.
Family assistance can take several forms, including:
- Parents allowing adult children to live at home rent-free while saving a deposit
- Cash gifts to boost a home deposit
- Loans from parents
- Parents acting as guarantors on a home loan
- Early inheritance arrangements
Research suggests that around 60% of first home buyers have received some form of assistance from family members to help purchase property. In many cases, the financial contribution exceeds $30,000, making it a significant part of the home buying journey.
With substantial amounts of money involved, having a clear written agreement can benefit everyone involved.
Why a Written Agreement for the Bank of Mum and Dad Matters
Many families rely on trust and informal conversations when providing financial assistance. While this approach may seem straightforward, it can create complications later.
A written agreement provides clarity around:
- Whether the money is a gift or a loan
- Any repayment expectations
- Timeframes for repayment
- Interest arrangements (if applicable)
- What happens if circumstances change
Without documentation, misunderstandings can arise between family members, particularly if financial situations change, relationships become strained, or unexpected events occur.
From a lender’s perspective, written evidence can also help verify the source of funds and reduce delays during the home loan assessment process.
Benefits of Having the Arrangement in Writing
A documented agreement can:
✔ Reduce misunderstandings between family members
✔ Provide certainty for all parties
✔ Help lenders understand the nature of the financial support
✔ Support compliance with lending requirements
✔ Assist with future financial planning
✔ Create a record that can be referred to if questions arise later
Even families with strong relationships often find that putting the arrangement in writing protects everyone involved.
How Lenders View the Bank of Mum and Dad
One of the first questions a lender will ask is whether the funds received from parents are a gift or a loan.
This distinction is important because it can affect your borrowing capacity and loan approval.
If the Money Is a Gift
When parents provide funds as a genuine gift, lenders generally do not treat it as ongoing debt.
This means:
- The gifted amount can be used toward your deposit
- No repayments are factored into your living expenses
- Your borrowing capacity is usually unaffected
Most lenders will require documentation confirming that the funds are a gift and do not need to be repaid.
If the Money Is a Loan
If parents expect repayment, lenders may assess the arrangement differently.
They may:
- Include repayments in your living expenses
- Consider the loan when calculating serviceability
- Reduce your borrowing capacity
This doesn’t mean your application will be declined, but the lender needs a clear picture of your financial commitments.
This is where a written agreement becomes particularly valuable.
New Compliance Requirements Make Documentation More Important
Recent changes to anti-money laundering regulations have increased scrutiny around the source of funds used in property transactions.
From 1 July 2026, real estate professionals have additional obligations to verify the identity of buyers and, in some circumstances, understand where purchase funds originate.
For first home buyers using the Bank of Mum and Dad, this means questions may arise about:
- Where the money came from
- Whether it is a gift or loan
- Who provided the funds
- The nature of the arrangement
Having clear documentation available can help answer these questions quickly and avoid unnecessary delays during the property purchase process.
What Documents Might Be Required?
The documentation needed will depend on the type of assistance being provided.
Gifted Funds
If the money is being gifted, lenders commonly require:
- A Gift Letter or Gift Declaration
- A Statutory Declaration confirming no repayment is expected
- Evidence of the transfer of funds
The exact requirements vary between lenders.
Family Loans
If the funds are being provided as a loan, you may require:
- A formal loan agreement
- Details of repayment arrangements
- Independent legal advice
- Additional lender documentation
Guarantor Arrangements
If parents are acting as guarantors, lenders will typically require:
- Independent legal advice for the guarantors
- Financial assessment of the guarantors
- Guarantee documentation
- Additional lender-specific forms
Seeking legal advice before entering any family financial arrangement is strongly recommended.
Genuine Savings Still Matter
While the Bank of Mum and Dad can significantly boost your deposit, lenders often look beyond the deposit amount itself.
Many lenders still want to see evidence of genuine savings.
Genuine savings demonstrate your ability to:
- Budget effectively
- Save consistently
- Manage ongoing financial commitments
- Handle mortgage repayments responsibly
Depending on the lender, genuine savings may need to be demonstrated over a period of three to six months.
Examples include:
- Regular savings contributions
- Funds held in a savings account
- Term deposits
- Managed funds held over time
Showing a consistent savings history can strengthen your application, even when family assistance is involved.
Your Income Remains the Key Factor
A common misconception is that receiving help from the Bank of Mum and Dad guarantees home loan approval.
In reality, lenders still focus heavily on your ability to service the loan.
They will assess:
- Your income
- Employment stability
- Existing debts
- Living expenses
- Credit history
- Future affordability
Even with a generous deposit contribution from family, you still need to demonstrate that you can comfortably manage repayments over the long term.
This is why choosing the right loan structure and lender is so important.
How to Protect Family Relationships
Money can be one of the biggest sources of conflict within families, even when intentions are positive.
If you’re receiving assistance from parents, consider discussing:
- Expectations around repayment
- Future financial circumstances
- Property ownership arrangements
- Exit strategies if situations change
- Communication expectations
Having these conversations early and documenting the outcome can help preserve relationships while ensuring everyone understands their obligations.
The goal is not to create mistrust—it is to create clarity.
Final Thoughts on the Bank of Mum and Dad
The Bank of Mum and Dad continues to play a vital role in helping first home buyers achieve home ownership sooner. Whether the assistance comes as a gift, loan, guarantor arrangement, or early inheritance, family support can make a significant difference when saving for a deposit.
However, with larger sums of money involved and increasing compliance requirements, having a written agreement in place has never been more important.
Clear documentation can help satisfy lender requirements, reduce misunderstandings, support property transactions, and protect family relationships.
Most importantly, it helps ensure everyone involved understands exactly how the arrangement works.
Ready to Use the Bank of Mum and Dad to Buy Your First Home?
Book Your Free Home Loan Review Today
Whether you’re looking to reduce repayments, refinance, access better features, or simply check you’re still getting a competitive deal, we’re here to help.
Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au
Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.
About the Author:
Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.
Connect with Louisa on Linkedin.
Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.