1. Gifted deposit

Squirrel mortgage broker John Bolton says this is the most common way parents help financially.

But while it is usually called a gifted deposit, the money is almost always a no-interest loan.

‘‘The main reason it’s given as a loan, rather than a gift, is so it doesn’t become part of the matrimonial property,’’ he says.

‘‘Relationships don’t always last forever – there is a lot of financial pressure on young families these days, and the last thing you want is three years later half the money has to be given to the other partner in marriage split.’’

Bolton says banks want parental loans to have some standard conditions that no encumbrance will be put on the title, and that the loan is on demand, but not repayable until after the property is sold.

‘‘The bank is looking at the servicing, and whether the parents are tying the children to a formal commitment [regular repayments]. And when the answer is no, the bank ignores the loan.

‘‘We often see these loans around $200,000 and even in Auckland, this gets the kids into a property they couldn’t otherwise afford. The money is often coming from granny’s inheritance, which the parents don’t need as they are in their 50s with a mortgage that’s nearly paid off.’’

One Auckland parent Stuff spoke to said he and his wife were fortunate to be able to loan each of their three children $100,000 to put towards their first homes – two in Te Atatu Peninsula and one in One Tree Hill.

‘‘For each child, it was officially drawn up by our lawyer as a loan, which was interest free, and not hidden from the banks. They all had the option of paying it off slowly – for example, over 25 years (as one is doing) – or not at all. But, on our deaths, the outstanding amounts will be taken into account when considering legacy.’’

But family lawyer Jan McNamara of Mac & Co Lawyers says lawyers do not like these types of loans.

Bolton also says he always recommends parents take legal advice.

‘‘As a loan, it is unsecured,’’ says McNamara. ‘‘There is no visibility. You don’t know if the children are borrowing more against that property. They might heavily leverage the property to buy another investment property and not tell you. You are relying on their goodwill.’’