Navigating Family Assistance for first home buyers in Sydney's Property Market
- Lenny Briffa
- Mar 8
- 5 min read
For many first home buyers, entering the property market today is far more challenging than it was for previous generations. While strong incomes and disciplined saving remain important, the gap between wages and property prices in major cities like Sydney has widened significantly.
As a result, family support, often referred to as the “Bank of Mum and Dad,” has become an increasingly common way to help buyers bridge that gap.
Several structural factors are driving this trend:
1. Property Prices Have Outpaced Wage Growth
Over the past two decades, property prices have risen faster than household incomes. While many buyers can service a mortgage, saving a deposit has become significantly harder.
2. Higher Serviceability Buffers
Borrowing capacity is assessed using interest rate buffers several percentage points above current rates. These buffers help protect borrowers against future rate rises but can reduce the amount buyers are able to borrow.
3. The Cost of Renting While Saving
High rental costs in metropolitan areas make it difficult to build savings. Even buyers with strong incomes often find a significant portion of their earnings goes toward rent.
4. Families Want to Help the Next Generation
Many parents who benefited from earlier property cycles now have substantial equity in their homes and choose to assist their children earlier rather than waiting to pass on wealth later in life.
Because of these factors, family assistance has become an important part of Australia’s property landscape. When structured correctly, it can help overcome deposit shortfalls or borrowing capacity constraints, allowing buyers to enter the market sooner. However, the structure of that support matters. Different strategies solve different financial challenges, and each comes with its own risks and considerations, which are outlined below.
The Strategy Matrix
Family Guarantee
Best for: Deposit Shortfall
A parent uses equity in their own property to secure the buyer's 20% deposit gap.
Allows a deposit of less than 20% without incurring LMI fees.
Risks the parent's asset if the buyer defaults and ties up their equity, impacting future borrowing power.
The 99% / 1% Strategy
Best for: Income / Borrowing Capacity Shortfall
Adds a family member’s income to the loan by taking a nominal 1% property ownership stake.
May provide a major uplift in borrowing capacity for applicants.
Creates joint and several liability which may severely impact the parents' own future borrowing.
Gifted Deposit
Best for: Deposit Shortfall
Parents provide a lump sum cash gift that adds directly to the buyer's deposit.
Immediately increases purchasing power; some lenders may waive genuine savings requirements.
Requires a statutory declaration confirming it is a non-refundable gift; reduces the parents' own liquid cash.
How These Strategies Can Work in Reality
Scenario 1:
Sarah (26) wants a $700k apartment. She has a strong salary but only a 5% ($35k) deposit. Her parents act as guarantors, using $105k of equity in their own home as security to cover Sarah's 15% deposit gap. Subsequently, Sarah’s loan is approved for the full amount required. She buys the apartment today and avoids having to pay LMI fees. However, if Sarah defaults, the bank can force the sale of her parents' home to recover the $105k.
Scenario 2:
Tom (24) has a great $150k deposit for an $800k townhouse, but his entry-level salary only qualifies him to borrow $450k of the $650k he needs. Tom and his mother buy the property as "Tenants in Common," Tom owns 99%, and his mother owns 1%. The bank assesses their combined incomes. Subsequently, the $650k loan is approved based on both incomes. Tom buys the townhouse and makes the monthly repayments himself. Tom’s mother is fully liable for the entire $650k debt, which may restrict her ability to borrow for her own future needs.
Scenario 3:
Mia and Leo want a $900k home. They have a 10% ($90k) deposit but want to reach 20% to avoid LMI and unlock a lower interest rate. Leo's parents provide an early inheritance, transferring a $90k lump sum directly into Mia and Leo's bank account. | Their total deposit is boosted to 20% ($180k), eliminating LMI altogether and securing a top-tier interest rate. Leo's parents must sign a statutory declaration confirming the money is a non-refundable gift.
Please note: The information provided in this article is general in nature and does not constitute credit advice. Lending policies, eligibility criteria, and government schemes vary between lenders and may change over time. Individual financial circumstances should be assessed before implementing any strategy. Before making any financial decisions, consider seeking advice from a licensed mortgage broker, financial adviser, accountant, or legal professional where appropriate.
Determining the Right Approach for first home buyers
The right strategy depends on your personal goals, financial position, borrowing capacity, and eligibility for government support schemes.
At Orca Home Loans, our role is to help you understand your options and structure lending in a way that aligns with your long-term property plans.
With over 26 years of experience in finance and risk, we focus on ensuring clients make informed decisions with confidence.
Contact us to find out whether a strategy involving help from your family could work for you. Contact Us
Frequently Asked Questions: Family Assistance
Is a Family Guarantor the same as a Joint Borrower?
No. A Family Guarantor uses their property equity to help with the deposit. A Joint Borrower uses their income to help with the borrowing capacity. They solve two completely different financial shortfalls.
Do parents need to own their home outright to be a Guarantor?
Not necessarily. Parents can still have a mortgage on their own home, provided they have adequate equity (usually around 20–25% remaining after their own loan and the guarantee amount are calculated).
How long does a Family Guarantee stay in place?
It isn't permanent. The goal is to release the guarantee as soon as the child's property grows in value, or the loan is paid down enough that the debt is less than 80% of the property's value. We regularly review client loans to remove guarantees as early as possible.
Can parents be removed from a 99% / 1% loan later?
Yes. Once the child can support the debt alone, you can refinance the loan and legally transfer the parent’s 1% property title to the child. Initially purchasing the property with the parent having only a 1% stake helps minimize the stamp duty and any capital gains tax that will be triggered when performing this transfer.
What happens to the parents if the child misses a repayment on a Guarantor loan?
The parents are ultimately liable, but if set up correctly, they will only be liable for the specific portion they guaranteed (e.g., the 20% gap), not the entire loan. However, a default will severely impact everyone's credit files.
Does a gifted deposit need to be declared to the bank?
Absolutely. Lenders trace all large deposits. You will need to provide a statutory declaration stating it is a gift.
Can a family member just loan the child the deposit privately?
They can, but the bank will factor those private repayments into the child's living expenses, which will drastically reduce the amount the bank is willing to lend them.
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