Parental lending – what do you need to know?

Helping a child buy their first home is a huge milestone, but it shouldn't come with legal headaches. Whether you’re the parent or the buyer, a little planning now protects everyone’s interests later.

While this isn't legal advice, we’ve helped thousands of families navigate these conversations. Here’s how to avoid the common pitfalls of parental lending using a Relationship Property Agreement (Prenup), a Deed of Debt, or a Deed of Gift.

Protecting a parental loan or gift with a Relationship Property Agreement

A Relationship Property Agreement can help protect gifts or loans from a parent by specifying that they are separate property, not joint property. This Agreement is legally binding once certified, giving you, your parents and your partner a secure plan for the future.

A key reason to consider a Relationship Property Agreement would be to “contract out” of New Zealand’s equal sharing regime. If you live with a partner, any parental loan or gift towards the home you live in together may become relationship property. This means it would need to be divided equally with your partner in the event of separation.

A Relationship Property Agreement allows the parties to record whose assets and debts belong to whom, including a parental loan or gift. It typically covers all assets and debts owned by each party including such items as the family home, bank accounts, vehicles, chattels and KiwiSaver/superannuation. You and your partner can also assign responsibilities for mortgage repayments, bills and other financial outgoings.

The laws on equal division can apply to you and your partner if you are married, in a civil union or in a de facto partnership. The relationship can be de facto, in some circumstances, even if you haven’t lived together for three years. Whether a couple is in a de facto relationship is dependent on a number of factors including the duration of the relationship, the nature and extent of common residence, financial arrangements and many more factors.

Agreeable customers can complete an online questionnaire which produces a draft Relationship Property Agreement for just $595. We can make any necessary amendments at no extra cost. We can then provide a quote for certification with two independent lawyers on our panel at a fixed price.

Avoiding a family dispute with a deed

If you are also utilising a bank loan to fund your purchase (in addition to a parental loan/gift), the bank will typically require you to formalise the arrangement with your parents in a deed. It’s a great idea to get your deed sorted early in the process to avoid potential delays. A deed can help you to avoid any disagreements about your arrangement in the future.

A deed can record the nature of the arrangement (i.e. whether it is a gift or a loan) and any specific provisions such as interest. If the money is being gifted, you can get a Deed of Gift to record the arrangement. If the money is being loaned, you can get a Deed of Debt.

A deed is usually a simple document but it’s recommended that you obtain legal advice before you sign it. You can draft your deed with Agreeable for just $159.00 and we can provide a quote for legal advice from our lawyer panel.

Where to go from here

It’s important to take the right steps to protect your parents’ contribution to the purchase of your first home.

With a Deed of Gift or Deed of Debt, you can formalise the arrangement with your parents.

With a Relationship Property Agreement signed by you and your partner, you can protect your parents’ contribution from being subject to a claim from your partner as “relationship property”.

We know that getting a Deed or Relationship Property Agreement can be stressful, but it doesn’t have to be. Our team has made it easy for you to save time and money, keeping things simple for everyone involved.