Financial adviser Patricia Howard has seen many families torn apart by unintended financial consequences from using the bank of mum and dad. Picture: Supplied.
Families who use the bank of mum and dad to help buy a home can face heartache and catastrophic financial consequences when things don’t go to plan.
Just ask financial adviser, author and mother-of-three Patricia Howard who, in her professional life has seen many situations where this has occurred – sometimes with devastating results.
It even inspired her to write a book to help parents thinking about assisting their adult children purchase a home, along with a conversation she had with one of her sons about his own future property hopes.
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Ms Howard is Melbourne-based Howard Osmond Wealth’s managing director and also a former senior financial journalist with The Australian, The Australian Financial Review and The Age.
In her book The Bank of Mum and Dad: The No-Regrets Guide to Helping Your Children, Ms Howard outlines how there can be numerous pitfalls when assisting offspring to acquire a home.
“Over the years, I have witnessed so many families where mum and dad have tried to help, and it has just cause terrible upset and heartache within a family,” she said.
“As a financial adviser, typically I only hear about any of it, years after the event when the damage has been done.”
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Four in every five Australian parents are open to helping their kids break into the property market, according to a 2025 survey by real estate agency LJ Hooker.
A basic issue for parents to first consider is whether they actually have enough money to help their children – or, conversely to think through the best way to support the next generation in a way that’s meaningful to them.
Ms Howard advised parents against completely taking over their child’s home buying decisions, resulting in the children feeling like they should just go along with their parents.
However, some children can get accentuated “inheritance impatience” and believe their parents can to give them more money than they can realistically afford.
She also warned that parents should not help their children to the extent that they undermined their own financial security in retirement.
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Howard Osmond Wealth’s managing director Patricia Howard says parents need to understand that some adult children are very debt-adverse, don’t want to spend the next 30 years paying off a home loan. Picture: Supplied.
Ms Howard said some parents were asked to put their own home up as to help a child buy a home.
“It is possible in these situations, if everything goes wrong, for the bank or finance provider to sell up mum and dad’s home,” she said.
“Once this happens there may not be sufficient funds left for mum and dad to buy another home, it can have catastrophic consequences in retirement, hence my warning.”
Melbourne’s median house price hit $984,000 in June, Real Estate Group data shows. Picture: Jake Nowakowski
Ms Howard’s top tips for parents wanting to help their children buy a home are:
* If you must help them, do so by providing non-financial help such as letting a child live at home with you while they save a deposit.
* Clearly decide if it’s a loan or a gift. If it’s a loan, it should be clearly documented by a solicitor.
If it’s a gift you should give it with no expectations of ever receiving the funds back.
* If you must give a child money, create a five-year refinance arrangement.
This is where you give the money but agree in writing that the loan will be refinanced in five years, when the debt has been reduced and the property value has increased in value.
There should then be sufficient equity in the property to refinance the loan in a way where sufficient funds are released to repay you in full.
Cohen Handler Victoria managing director Nicole Jacobs says parents thinking of helping their children buy a home should seek expert advice.
Cohen Handler Victoria managing director and buyer’s advocate Nicole Jacobs said she would advise families wanting to help their children buy a home to seek advice from a financial professional or tax accountant.
Ms Jacobs noted that doing due diligence was also important, as was talking to children about how they were planning to pay off the mortgage.
“Don’t get emotional, go to auctions, see how they play out how they do it – don’t reveal everything to your selling agents out there, that’s really important,” she said.
Getting a building and pest inspection before putting money into a property was also essential, she added.
The Bank of Mum and Dad: The No-Regrets Guide to Helping Your Children is available from patricaihwoard.com.au for $29.95 plus postage.
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