Help Your Kids Buy a Home Using the Equity in Yours

How to Use the Equity in Your Home to Help Your Kids Buy Their First Home

With the property market rebounding and first home buyers finding it harder than ever to save a deposit, many parents are asking:

Can I use the equity in my home to help my child buy their first property?

The answer is yes—and there are multiple ways to do it, depending on your financial goals and risk appetite.

At Causbrooks Finance, we specialise in helping parents use the equity they’ve built in their own homes to support their adult children in becoming home buyers, while protecting their own financial future.

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What is Home Equity—and Why it Matters Now More Than Ever

Equity is the difference between what your property is worth and how much you still owe on your mortgage. For example, if your home is valued at $1.3 million and you owe $400,000, you have $900,000 in equity.

Thanks to strong growth in the property market over the last severeal decades, many Australians have seen their equity increase substantially—and are now in a position to use that equity to provide financial assistance to their children as they try to buy their own home.

Popular Strategies: How Parents are Helping Children Buy Property

1. Acting as a Guarantor (Family Guarantee)

The family guarantee is one of the most popular ways to help your child buy a home. It involves using the equity in your home as security for part (or all) of your child’s loan, often helping them meet the 20% deposit threshold and avoid Lenders Mortgage Insurance (LMI).

Guarantor loan basics: Your home backs the loan, not your cash.

Benefit: Your child may borrow up to 100% of the purchase price without needing genuine savings.

Risk: If the child defaults on the loan (child defaults), you could be liable—making asset protection and legal advice crucial.

This approach can significantly boost a young home buyer’s borrowing capacity, but it must be structured carefully to avoid unintended financial stress or future legal disputes.

2. Equity Release or Cash-Out Refinance

This strategy involves refinancing your home loan to release equity as cash. You can then either gift or lend this money to your child to use as a home deposit.

Gifted funds: If you’re providing a gift (child money), ensure your child’s lender accepts non-saved deposits.

Loaning money: You may prefer to lend the funds under a formal agreement. This can help with financial security, especially if your child is purchasing with a partner.

Working with a mortgage broker ensures the arrangement fits both your needs and those of your child—and complies with lender policies.

3. Gifting the Deposit or Structuring a Loan

Some parents choose to gift funds outright, while others prefer to structure a loan with legal documentation, repayment terms, and optional interest.

Tax implications may apply depending on how the arrangement is documented.

Lending money to family without clear terms can impact relationships and trigger financial stress later on.

Whether you choose to provide a loan or a gift, it’s essential to consider how the money will affect your retirement plans, cash flow, and long-term wealth strategy.

The Lender's Perspective: What Banks Want to See

Even if you're providing support, most banks will still assess:

• Your child’s credit rating and income history
• Their genuine savings and ability to make mortgage repayments
• Your own borrowing capacity, especially if you're going guarantor
• The nature of the property (e.g., location, size, valuation)

Lenders will also be cautious if the buyer is relying entirely on gifted funds without any personal contribution.

Pros and Cons of Using Your Equity

Benefits

Avoid LMI

By helping your child reach the 20% threshold, you avoid expensive lenders mortgage insurance.

Faster market entry

Your kids buy sooner before property prices rise again.

Lower rates

A larger deposit often qualifies for better loan terms.

Risks

Loan liability

Going guarantor may affect your ability to borrow in future.

Legal complexity

Co-ownership or family loans must be documented.

Impact on retirement

Equity used now reduces flexibility later.

It’s crucial to weigh these factors before deciding how much equity to release and whether it’s better to provide financial support as a gift or loan.

A Note on Tax and Legal Advice

Using equity to help your kids can have tax implications, especially when you draw down large sums or structure a private loan. You may also need to update your estate planning or review asset protection strategies to reflect the new arrangement.

Real-World Scenario: Helping their Son Buy His First Home

Andrew and Leanne had owned their family home in the Sutherland Shire for 20 years. With over $800,000 in equity, they wanted to help their son buy his first unit.

Causbrooks Finance helped them:

• Refinance their loan to access $120,000
• Gift the funds to their son as a home deposit
• Connect with a mortgage broker who ensured the lender accepted the gift
• Get legal advice to clarify the gift terms for future peace of mind

The result? Their son secured a unit in Mascot, avoided LMI, and locked in a fixed-rate home loan—while Andrew and Leanne preserved their financial security.

Final Thoughts: Should you use Equity to Help your Kids Buy Property?

For many parents, this is one of the most meaningful financial choices they’ll ever make. It can accelerate your child’s journey to home ownership, strengthen family bonds, and unlock new opportunities.

But the stakes are high. It’s not just about having enough equity—it’s about using it wisely.

Ready to Help Your Kids Get on the Property Ladder?

Book a free strategy call today and let’s explore how your home equity could give them the head start they need—without putting your future at risk.