New Zealand: Assisting family members with a property purchase

Last Updated: 17 September 2015
Article by Jenny Marren

Banks are restricted by the amount of lending they are able to offer purchasers due to a Loan to Value Ratio (LVR) imposed upon them by the Reserve Bank.

The LVR is the amount of the loan divided by the value of the property and if this is more than 80%, i.e. there is less than a 20% deposit, the banks are stricter with the amount they will lend.

If there is less than a 20% deposit, we suggest talking with a banker before starting the process of looking for a property. In some situations a deposit of 10% is enough, although in our experience those with less than a 20% deposit are often charged extra fees and higher interest rates.

If the bank won't lend, it is better to know this before spending time and money signing up to purchase a property. If finance has been pre-approved, the amount that can be borrowed will be known before starting a house hunt.

More often, we are seeing family members assisting a buyer who is just under a 10% or 20% deposit. We will use the example of a young couple buying their first home. The parents of partner A want to help the couple into the property.

There are different options available to the parents to help their child:


The parents could make an outright gift. However, this may have implications for them. For example, if their circumstances changed and they needed to request a return of the funds they would be unable to do so as the funds have been 'gifted'. The parents would be relying on their child to reciprocate the goodwill.

Making a gift may also affect future applications for means tested benefits or rest home care. A gift can be considered a 'deprival of assets' and the Government agency dealing with the application has the discretion to 'claw back' the gift into the applicant's asset pool, meaning that the person would have to pay for their care until their assets were under the qualifying level for Government assistance.


Parents may not have cash to give to their child, but they may have equity in their home or other property which they are comfortable using as security for the couple's borrowing.

We always recommend that any guarantee is limited to the minimum figure possible. In addition, we suggest there is an understanding between the guarantors and borrowers that the guarantee is to be released as soon as the borrower can stand on their own feet, i.e. when the equity in the property reaches 20%, whether it is by way of loan repayments or revaluation.

A guarantor should be aware of the borrower's financial circumstances on an ongoing basis. There is no obligation on the bank to update the guarantor as to the borrower's repayments or debt levels so a guarantor needs to stay informed directly through the borrower.

There is no benefit to a guarantor; they expose themselves to liability for the borrower's benefit, often by way of offering equity in their home as security.


With the bank's consent, a parent's contribution towards a purchase can be lent to the family member. That loan will rank behind the bank in terms of repayment and security.

Most banks are receptive to a contribution to purchase, which is recorded as a loan, so long as repayment of the family loan cannot be demanded until the sale of the property and after the bank has been repaid in full. These terms ensure the bank knows that the loan can't be called up at any time, which, in so doing, would alter the borrower's LVR.

If a lender wanted to take a registered security interest in the property, a second mortgage over the property could be registered with the bank's consent.

Other considerations may apply to the parents' circumstances and their decision to help their child:

Relationship Property

Parents may be happy to make a gift to a child but don't want to see those funds fall into relationship property realms where by a 'would have been in-law' walks away with half of the gift amount when the relationship breaks down.

A good option from a relationship property perspective is to make a 'repayable upon demand' loan to the couple. That way the loan can be called up if the relationship breaks down and the property is sold (likely after the bank has been repaid as per our comments above).

If a parent did gift to their child, a secondary layer of protection for that gift is if the child enters into a Relationship Property Agreement with their partner to record the gift as their separate property. Meaning that the gift amount would be payable to them in full should the relationship end.


Often a buyer with less than the required deposit will just want the purchase settled as cheaply as possible. However, due to the involvement of parents there are added transaction costs. Costs will vary depending on the circumstances.

The parties may want to complete a Contracting Out Agreement which defines each partner's separate property and documents how property is to be shared should the relationship end in the future. For this Agreement to be valid, each party needs to obtain independent legal advice which adds cost. It may seem like an expensive process, however, when the relationship ends and there is say a $50,000 family contribution at stake, the money spent to document that contribution as one partner's separate property is likely to be considered money well spent. It may be that those costs are met by the party providing the gift and can be included as part of the gift amount.

Other children

Parents may have the means to assist one child but know that it will set a precedent for their other children which they will struggle to meet. It may be that parents can assist their children in different ways, or that things are equalized as part of the parents' estate planning arrangements and are recorded in their wills.

Careful consideration needs to be given to estate planning in families and this process is better if it is started earlier.

Generally, our advice is for parents to loan funds to a child to get their deposit over the required threshold. That way they are able to call on the funds if they are needed in the future. However, as you will recognise there is no 'one size fits all' solution. If you are thinking of helping family members into a home or providing financial assistance, please contact one of the Wynn Williams private client team members to discuss.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Jenny Marren
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.