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Guarantees & deposit assistance from family

The many options of families helping with your deposit

With the Reserve Bank changes in late 2013 forcing most borrowers to have over 20% deposit there has been a much higher incidence of family assisting home buyers with funds towards their deposit for a home. There are a number of ways that this can be done and all have the pros and cons. Below we have covered some of the more popular options.

Gift for deposit

This is a great option if you have access to it and is by far the simplest option.  The pros are obvious, you're going to get a head start on your home loan and we'll be able to secure you an excellent deal.

The only cons are when this isn't an option for you... see below.

Loan for deposit

This is becoming the most popular way for parents to help their children in to a property. Parents could choose to lend you the money and have you pay back regular repayments or simply have you pay the money back when the house is sold or when you are in a better financial position.

If parents need to borrow the money for this they can do so using a Revolving Credit account alongside their existing home loan.  You can then make payments directly to this account and the interest is charged only to that account.  That way it is just like repaying your own loan but it is in your parents name

  • Risk to parents is limited only to the amount they are lending you
  • Easy management of repayment of loan
  • Excellent flexibility as a borrower since you have cash available
  • Some people feel funny about transferring money and prefer guarantees
  • Minor inconvenience for parents if they have to complete a loan application for deposit

Springboard Loan

You can find out more about that specific Springboard Home Loan product here.

Essentially this is using equity in your family's home and getting a small loan secured against the family property in the names of the buyers and the names of the owners of the family home to be able to get you to a 20% deposit.


  • Limits the risk of the family  to the loan secured against their existing property

  • Easy management of repayment of loan


  • Family are liable for the debt so it can limit them in the future

  • Both existing loans and new loans all have to be with the same lender (Westpac or BNZ only)

  • Family needs to be able to service the extra lending

Joint ownership

This option is becoming much more common.  In this situation your family may choose to buy the property 50/50 with you and therefore you have a joint liability for any lending. 

  • Part ownership of a property without a large deposit
  • Guidance from your family as experienced home owners
  • The opportunity to buy out your family's share once you have increased equity
  • Joint borrowing means a shared loan account and lack of privacy
  • A cost involved in taking full ownership of the property in the future
  • Liability for parents if you do not honour your end of the agreement

Parental Guarantee

This option was once very common but has fallen out of favour with many Financial Advisers and Lawyers in recent years.  This involves parents simply guaranteeing your home loan by providing the bank you are borrowing from with a mortgage over their property and an assurance they will honour the obligations of any loan contracts should you fail to meet them.


  • No cash changes hands between family members


  • Restricts parents ability for further borrowings as bank assesses your lending as belonging to them also

  • Must use same bank as parents which may lead to not receiving the best deal

  • Complex to unwind once you have sufficient equity to standalone

  • Biggest risk is that you fall behind in mortgage payments and the bank choose to send both your property and your parents property to Mortgagee Sale

Every person's situation is different so we would definitely like to discuss your situation in more detail so that we can help tailor a solution that is going to be the best fit for you. This may also involve a discussion with a Lawyer or Accountant, especially where Family Trusts or Businesses are involved.

As always, we are here to help find the very best deal so if you, or someone you know, would like some advice on the best fixed rate options then get in touch.

Greg, Adam, Claire and the My Mortgage team


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