Helping your children buy a home: A necessity, but not without risk

Over the past five years, helping adult children into home ownership has shifted from a generous choice to a financial necessity for many Australian families.

Rapidly rising house prices, higher interest rates have meant that far more first home buyers now rely on their parents, whether through cash gifts, guarantor loans or shared ownership. 

While this support can be rewarding to see your children get their own home, it carries real and often underestimated risks for parents, particularly when it comes to retirement security and long term wealth.

Rising mortgage costs and the growing role of parents

Australia has experienced one of the sharpest increases in mortgage costs in decades. Between 2021 and 2024, the Reserve Bank of Australia lifted the cash rate from 0.10% to over 4%, pushing average variable mortgage rates from around 2% to more than 6%. While this has seen interest rates move from historical lows to more normal rates, on a typical $750,000 loan, this increased monthly repayments by $1,720, or more than $20,000 per year.

At the same time, house prices surged. Capital city dwelling values rose by as much as 65% between 2010 and 2024, lifting a standard 20% deposit from roughly $130,000 to nearly $200,000. Saving this amount while renting has become increasingly difficult, particularly as rents have also accelerated. 

Unsurprisingly, parents have stepped in. Finder estimates that over 60% of first home buyers now receive parental help, with the “Bank of Mum and Dad” worth approximately $35 billion nationally. Importantly, the nature of this support is changing: the proportion of parents acting as guarantors or helping with mortgage repayments has risen since 2019, reflecting deeper and riskier involvement. 

The impact on future wealth and retirement

Helping children can feel deeply rewarding, but the long term cost to parents is often hidden. Large lump sum gifts reduce investable assets, while guarantor arrangements expose the family home to risk if repayments cannot be met. Even assistance that “only” involves helping with deposits can materially reduce retirement balances.

Australian research by Curtin University indicates that parental support for first home buyers has increased. For children who purchased 10+ years ago, 44% of parents provided support. This has increased to 58% for children who purchased within the last 5 years. While rent free living is now the highest way to support children get into their own home, of the parents surveyed who provided support, cash gifts remains high at 35%.

While this support may help overcome immediate affordability barriers, the long term cost to parents is often underestimated. Drawing on retirement savings or other long term capital markedly reduces eventual retirement balances due to the loss of compound investment returns. This impact is most pronounced when funds are accessed in the pre retirement years and are not replenished.

The timing matters too. Many parents are helping children in their late 50s or early 60s—precisely when their own focus should be shifting from growth to capital preservation and retirement income planning. What feels manageable today may translate into lower retirement income, delayed retirement, or greater reliance on the Age Pension later.

Common traps and how to avoid them

Parents often fall into similar traps when helping children buy property:

• Helping one child but not others: unintentionally creating future estate disputes should it seem one child has received more financial support than their siblings.
• Acting as a guarantor without understanding liability: assuming banks will “never call on it.” Parents remain at risk while listed as guarantor on their children’s homes. Parents should remove themselves as guarantor as soon as practicable.
• Using super or redrawing the family home loan: without modelling long term impacts to ensure they can still retire comfortably.
• Relying on informal agreements: rather than documenting loans or gifts.

Estate planning is frequently overlooked. What happens if one child divorces, encounters financial stress, or needs ongoing help? How will earlier assistance be treated under your will? These issues are manageable, but only if they are addressed deliberately and early.

Seeking licensed financial advice, alongside legal and tax advice where appropriate, is critical. An adviser can model different scenarios, stress test outcomes and help structure assistance in a way that balances generosity with protection.

Making the right decision, for them and for you

Helping your children isn’t inherently a mistake. For many families, it has been the only way to overcome affordability challenges. But you need to weigh up the cost to your financial security.

Before proceeding, parents should ask:

• Can we still retire comfortably? Even if interest rates increase?
• Are we clear on whether this support is a gift or a loan?
• Has our Estate Planning been updated to consider the gift or loan?
• Have we stress tested our plan?

Supporting children into home ownership can be part of a sound family strategy but only when it sits within a well defined personal financial plan. Ensuring your own retirement remains secure is not selfish; it protects both you and your family in the long run.

FOR MORE INFORMATION

If you would like to learn more about the topics discussed in this article, please contact your local RSM office.