Bank of Mum and Dad NZ — Using Family Help to Buy Your First Home

The “Bank of Mum and Dad” has become one of the most significant factors in New Zealand’s first home buyer market. As deposits for a median NZ property now require $120,000–$200,000, intergenerational wealth transfer has become an important mechanism for many first home buyers.

Forms of Parental Help

Method	What it involves	Impact on parents
Gifted deposit	Cash gift to child	No obligation to repay; reduces parents’ assets
Family guarantee	Parents’ property used as additional security	No cash required; parents’ property at risk
Loan from parents	Parents lend deposit at 0% or low interest	Treated as a liability by the bank
Co-purchasing	Parents buy with child jointly	Both names on title; income and credit assessed together
Equity release (reverse mortgage)	Parents borrow against their home to fund child	Interest compounds; reduces parents’ estate

Gifted Deposit

The most common form of Bank of Mum and Dad in NZ. Parents gift cash — often from their own savings, or by remortgaging their own home to release equity.

What banks require:

A deed of gift (or gift letter) signed by the donor, confirming the money is a genuine gift with no repayment obligation
Confirmation that no security interest over the child’s property is expected
Provenance of the funds (where did the money come from?)

Key rule: The bank must verify it’s a true gift. If there’s any indication the parents expect repayment, the bank may treat it as a liability and reduce the child’s borrowing capacity.

See Gifted Deposit NZ for the full documentation guide.

Family Guarantee (Guarantor Mortgage)

Parents with equity in their own home can act as a guarantor — their property provides additional security, allowing the child to buy without a 20% deposit and without rate loading.

How it works:

Child buys with, for example, 10% deposit
Parents guarantee the gap between child’s deposit and 20% LVR
Bank holds security over both the child’s new property and the parents’ property for the guaranteed portion
As the child’s property appreciates and mortgage is repaid, the guarantee can be released

Risks for parents:

If the child defaults, the bank can pursue the parents’ property for the guaranteed portion
Parents should get independent legal advice before guaranteeing

See Guarantor Mortgage NZ for the full guarantee process.

Loan from Parents (Treated as a Liability)

If parents lend (rather than gift) the deposit, the bank treats it as a debt:

The loan reduces the child’s net assets (deposit is offset by the liability)
Monthly repayments to parents reduce the child’s assessed living costs capacity
This typically makes it harder to get approved for a mortgage, not easier

Workaround: If parents don’t require repayment during the mortgage period, some banks may treat it differently — but documentation must clearly show this. Banks are alert to this and may ask detailed questions.

Co-Purchasing with Parents

Parents and children purchase together:

Both on the title
Both assessed for income and liabilities
Parents’ income can increase the household’s borrowing capacity

Issues:

Parents’ existing mortgage commitments count against borrowing capacity
If parents are approaching retirement, their income projection may limit usefulness
Joint ownership creates capital gains tax (bright-line test) implications if the property is not both parties’ main home
Ownership arrangements should be clearly documented (property sharing agreement, trust)

Tax Considerations

Bright-line test: If parents co-own a property that is not their main home, they may face tax on any capital gain if the property is sold within the bright-line period. As at 2026, the bright-line period is 2 years for new builds, 10 years for existing properties. Legal advice is essential for co-purchase arrangements.

Gift duty: Gift duty was abolished in NZ in 2011 — there is no gift duty on cash gifts to children for deposit purposes.

Relationship property: A gifted deposit may be treated as separate property (if property law protections are documented) or as relationship property (if not protected). Legal advice is recommended.

Practical Tips

Document everything clearly — whether gift, loan, or guarantee, the terms should be in writing (deed of gift, loan agreement, or guarantee document)
Gifted is generally simpler — a straightforward gift avoids the liability calculation that a loan creates for bank assessment
Get independent legal advice — especially for guarantees and co-purchases where parents’ property is at risk
Discuss estate implications — if one sibling gets parental help and another doesn’t, this may need to be accounted for in estate planning
Check your bank’s requirements early — contact your bank or broker before arrangements are finalised to confirm what documentation is required