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Helping your child into their first home

In this crazy property market, it’s pretty common to hear of the struggles people face in securing their first home. With an extremely competitive market, stricter lending criteria and colossal prices, you may have a family member (most likely a child) in this situation. If you’re in a position to offer financial help, there are several options you could consider. In this blog post, we weigh up your options for how to help a child or other family member into property. 


Option One – Loan

A loan is an option if you expect the contribution to be repaid at some point. You can enter into a loan agreement or by a deed of acknowledgement of debt, depending on the repayment terms you agree on. Detail includes the loan terms such as timeframe for repayment, and any interest details if you decide to charge interest. Your child’s bank needs to approve the arrangement and as the loan provider you do not have any right to ownership of the property.


Option Two – Gift

A gift contribution is a good option if neither party expects the funds to be repaid. To make a gift, you need to complete a Deed of Gift with your Lawyer. But beware, if the family member (most likely your child) is in a relationship at the time of the property purchase, and they later separate from their partner, they are required to share the proceeds of the property sale equally. You do not recover your contribution and your child’s partner benefits from your gift.


Option Three – Investment

Investing in the property means you advance the funds on the basis that you and your child each own a share in the property. In this case, both your name and your child’s name is recorded on the title. In most cases, the bank would require you to apply to the bank for lending as a joint owner, possibly as a joint borrower under the loan agreement and mortgage, and possibly also as a guarantor, guaranteeing the child’s obligations under the loan agreement. If your child separates from their partner, you retain your share in the property while your child’s share in the property would normally be divided equally with their partner.


Option Four – Relationship Property and Trusts

If you or your child wanted to retain any money advanced for the purchase of the property, or any increase in the value of the property, an agreement can be signed by your child and their partner that complies with the Property (Relationships) Act 1976. Alternatively, you can purchase the property in the name of a Trust, which is a way to protect the asset from a relationship property claim.


Need Help To Understand Your Options?

Every situation is different and depends on:

  • Your financial ability to contribute – do you need / want to be repaid?
  • Your appetite for risk – some options may require you to co-sign loan agreements
  • Your family member’s relationship status – do they have a partner and will that put your financial contribution at risk if they later separate?

Get in touch with our Legal experts to discuss your options – we’re here to help.

Email reception@kellys.co.nz

Phone 07 871 7878