Understanding Your Obligations
Your parents are helping you buy a home. Here is what you need to know before you sign anything.
Your parents' solicitor does not act for you. They are instructed to protect your parents' interests. You should obtain your own independent legal advice before signing any loan documents.
Receiving financial help from your parents to buy a home is a significant advantage in today's property market. But it comes with real legal obligations that you need to understand before you sign anything.
Whether the advance is structured as a gift or a loan makes an enormous difference — to your obligations now, and to what happens if your relationship changes in the future. This guide explains the key issues from your perspective.
Gift or Loan — What Is the Difference?
If it is a Gift
- You do not have to repay the money
- The money is treated as your financial contribution in any property settlement
- Your parents cannot register a mortgage or caveat over your property
- In family law proceedings, the gift increases your contribution percentage
- Your parents cannot recover the money if you separate
- Centrelink deprivation rules may apply to your parents
If it is a Loan
- You are legally obligated to repay on the agreed terms
- Your parents will execute a mortgage over your property — registered if the bank consents, otherwise held unregistered with a caveat lodged on title
- In family law proceedings, the loan reduces the net asset pool
- Your parents can demand repayment and enforce their security
- Default may lead to mortgagee sale proceedings
- The loan remains in your parents' estate after their death
What About Your Partner?
If your partner's parents are providing the loan
If you are the partner of the child receiving parental assistance, you have distinct rights and obligations that deserve careful attention. Your parents-in-law's solicitor acts for them — not for you.
If you are a co-owner of the property, you will likely be asked to sign the loan agreement as a co-borrower and to consent to a mortgage or caveat. This makes you jointly and severally liable for the debt — meaning your parents-in-law can pursue you personally for repayment if your partner cannot pay.
Do not sign under pressure. You are entitled to take time to obtain independent legal advice before signing any loan documents or consenting to a mortgage. A reputable solicitor acting for the parents will send you a letter recommending you seek independent advice. Take that advice seriously.
Your Key Rights
Right to see the documents
You are entitled to receive and read all loan documents before signing. Do not sign anything you have not read and understood.
Right to independent advice
You have the right to obtain independent legal advice from a solicitor of your own choosing, at your own expense, before signing.
Right to negotiate terms
The terms of the loan agreement are not set in stone. You can negotiate repayment terms, interest rates, and the type of security before signing.
Right to refuse
You have the right to refuse to sign the loan agreement or consent to a mortgage. However, this may affect whether the purchase proceeds.
Frequently Asked Questions
Get independent legal advice
This guide provides general information only. Before signing any loan documents, speak to a Victorian property lawyer who acts for you — not your parents.
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