How family can help you buy a house in NZ

How can family help you buy a home?

Family can help in any of these ways:

1. Give you money towards your deposit.
2. Lend you money, which you pay back.
3. Link their savings to your offset mortgage, so you pay less interest.
4. Guarantee part of your loan, using their home as extra security.
5. Take out a joint loan with you for part of your deposit.
6. Buy the home with you.

Different options suit different families. Some need your parents to have cash, while others need them to own a home with plenty of equity, and each one carries its own risks for them.

Giving you money

The simplest way is a gift towards your deposit. NZ hasn't had gift duty since 1 October 2011, so there's no tax on the gift itself. Your bank will want proof the money doesn't need to be paid back. BNZ, for example, asks for evidence like a gifting certificate.

A gift has one big catch. If you buy with a partner and later break up, money your parents gave you can become relationship property and be split between you.

Lending you money

Your parents can lend you money instead, with an agreement about when and how you'll pay it back. ANZ gives the example of a couple whose parents lent them part of their deposit at an interest rate that worked for everyone. They all used their own lawyers to set up a formal loan agreement, and the couple pays their parents back every fortnight. A loan like this is often written up as a deed of acknowledgement of debt.

Your bank will count your repayments to your parents when it works out what you can afford. A properly recorded loan can also protect your parents' money. Law firm Denham Bramwell explains that if a relationship ends, a loan may be repaid to the parents before the couple splits their property, while a gift may be split. The law presumes money from parents to children is a gift unless there's evidence it was a loan. So if your parents want their money back, they should get legal advice before signing a bank's gift certificate.

Linking their savings to your mortgage

If your parents have savings but don't want to give them away, they can link their accounts to your offset home loan at Kiwibank, Westpac or BNZ. The money stays in their name, and they can take it back whenever they need it. While it's linked, it doesn't earn them interest, but it lowers the interest you pay. With $80,000 linked, about 10% of the national median house price, you'd save about $3,990 a year compared with a 4.99% fixed rate.

The offset mortgage guide shows which family accounts each bank accepts and what to watch out for.

Guaranteeing your loan

With a guarantee, a family member agrees to cover some or all of your loan if you can't pay, and their home is used as extra security. The guarantee costs them nothing upfront, and it can mean you need a smaller deposit or can borrow more. ASB says another property can be used as security, and it'll check whether you can afford the repayments and look at the LVR.

The risk falls on your family. BNZ says that if they can't cover the guaranteed amount, their home could be sold to repay your loan. ANZ checks that the guarantor can afford it, and the guarantor must get independent legal advice before signing.

Taking out a joint loan with you

Some banks let parents share just part of your loan. With Westpac's Family Springboard, you borrow the rest of your deposit in a smaller loan in both your name and your family's name, secured by both homes. Your own loan, for up to 80% of the house, can be in your name only. Your family must own their home, and both properties need to be with Westpac.

BNZ calls this family assisted lending. You take out a larger loan in your own name and a smaller joint loan with your parents. They're only liable for the joint loan, and they can see its balance in Internet Banking.

Buying the home together

You can also buy with family and share the deposit and repayments. At Kiwibank, co-owners usually all borrow on one joint loan, and each person is responsible for the whole loan, not just their share. If at least one of you will live in the home, you'll generally need a combined 20% deposit.

Get legal advice first

Whichever way your family helps, everyone should get their own legal advice, and for a guarantee it's required. If you're buying with a partner, a contracting out agreement can set out what happens to your family's money if you separate. Write down what everyone agreed, so there's no confusion later about whether money was a gift or a loan.

Common questions