Does a Bank of Mum and Dad loan need a written agreement?

If the money is genuinely a loan, yes. Parent-to-child money is legally presumed to be a gift (the presumption of advancement) unless documented otherwise - without a written agreement, recovering it after a separation or dispute is an uphill argument.

What should a family loan agreement for a house deposit include?

The parties and amount, a plain statement that it is a repayable loan and not a gift, interest (or explicitly none), a repayment schedule, trigger events like sale or separation, any security (caveat or second mortgage), default terms, and signatures with independent advice for affected partners.

Can parents put a caveat on their child's property?

Yes, if they have a caveatable interest - which a properly drafted loan agreement with a charging clause typically provides. A caveat flags the parents' interest and prevents a quiet sale or refinance; a registered second mortgage is stronger but needs the first lender's consent.

Does a family loan reduce how much the child can borrow?

Yes. A repayable loan is a liability the child must declare, and it reduces serviceability. Many lenders instead require a signed gift letter stating the money is not repayable - so the family must decide what the money is and tell the bank, the agreement and each other the same thing.

Australia · 9 min read · Laddered Editorial · 21 Jul 2026

Bank of Mum and Dad Loan Agreements: What to Put in Writing (Checklist)

If parent money is a loan and not a gift, the law wants to see it in writing — and so does the child's lender, and one day maybe the Family Court. Here's what the agreement needs to say, clause by clause.

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This article is general information only and is not legal, financial, tax, or property advice. Consider advice from a qualified professional for your circumstances.

"We'll sort it out later" is a legal position, and a bad one

Australian parents lend and gift billions toward their kids' deposits every year — by most counts the Bank of Mum and Dad sits among the country's biggest lenders. Most of that money moves on a handshake. The problem is that when parent money isn't documented, the law doesn't treat it as undecided; it applies defaults. And the defaults mostly run against the parents.

The big one is the presumption of advancement: money from parent to child is presumed to be a gift unless there's evidence it was a loan. Years later, when the child separates from a partner or a sibling asks why they got less, "it was always a loan" is an uphill argument with no paperwork behind it. If the money is a loan, the time to make that true is before it moves.

(Whether it *should* be a gift, a loan, or an equity share is its own decision — we've compared the three. This article is for once you've landed on "loan.")

What a family loan agreement needs to say

Treat this as the checklist. A solicitor turns it into a document quickly when the answers are ready.

The parties and the amount. Who is lending, who is borrowing (the child alone, or the child and their partner — a consequential choice, see below), how much, and what it's for.
That it is a loan. Plainly stated, to rebut the presumption of advancement. The agreement should say the money is repayable and is not a gift.
Interest, or explicitly none. Family loans are commonly interest-free — say so if so. If there is interest, name the rate and how it accrues.
Repayment terms. Regular repayments, a lump sum on sale or refinance, or repayable on demand — pick one and write down the schedule and the end date. Vague repayment terms are what make courts (and lenders) treat a loan as a gift wearing a costume.
Trigger events. What accelerates repayment: sale of the property, the child's separation or divorce, default on the mortgage, death of a borrower, bankruptcy. Separation is the trigger that matters most in practice — an undocumented parent loan often simply becomes part of the asset pool split with the ex-partner.
Security, if any. Unsecured, a caveat over the property, or a registered second mortgage (see below).
Default terms. What happens if repayments stop - notice, a cure period, then enforcement.
Signatures, dates, and independent advice. Both generations sign; if the child's partner is a borrower or affected, they should get independent legal advice — it protects the enforceability of the agreement as much as it protects them.

Loan to the child, or to the couple?

If the child is buying with a partner and the loan is to the child alone, say so, and route the money accordingly. On a later separation, a documented loan to one party is far easier to keep out of the shared pool than a vague family contribution to the household. If both are borrowers, both sign, and both are on the hook — which parents may actually prefer. Decide it consciously; it's one line in the agreement and a world of difference in a settlement.

Caveat or second mortgage: how parents take security

A caveat is the lightweight option: it doesn't create an interest by itself, but it flags the parents' claimed interest on the title and stops the property being sold or refinanced over their heads. Cheap, quick, and needs a caveatable interest to be valid — which a properly drafted loan agreement (often with a charging clause) provides.
A registered second mortgage is the heavyweight option: an actual security interest behind the bank. It's stronger in a default or bankruptcy but needs the first lender's consent, which adds friction and is sometimes refused.
Nothing is also a choice — plenty of family loans are unsecured — but then the parents rank as ordinary unsecured creditors if things go genuinely wrong.

Don't forget the child's bank

A repayable family loan is a liability, and the child's lender will treat it as one: it goes on the application and reduces borrowing power. Hiding it — calling a loan a gift on the application while holding a repayment agreement at home — is the kind of contradiction that surfaces at the worst time, since many lenders require a signed gift letter declaring the money is *not* repayable. Decide what the money is, and tell everyone the same story: the bank, the agreement, the family.

Two traps that surface years later

The limitation clock. Enforcing a loan is subject to limitation periods — generally six years from when the debt becomes enforceable in most states. A loan "repayable on demand" with no demand ever made can quietly become unenforceable. Periodic written acknowledgment of the debt, or actual repayments, keeps it alive.
The estate question. If the loan is outstanding when the parents die, is it repayable to the estate, or forgiven? Say so — in the agreement, in the wills, or both — and think about how it squares with siblings. An undocumented loan to one child is a family fight in draft form; a documented loan that the will forgives (or offsets against that child's inheritance) is a plan.

Keep the record, not just the agreement

The agreement proves what was intended. The repayment record proves what happened — and in any later dispute, both matter. If the loan sits inside a broader co-ownership (parents on title with an equity share as well as a loan), the record-keeping is exactly what Laddered is for: contributions, repayments and shares tracked in one ledger the whole family can see, so "what's been repaid" is a number, not a memory.

This is general information, not legal or financial advice. Family loans touch property law, family law, tax, pensions and estates, and the details differ by state — have a solicitor draft or review the agreement, and loop in an accountant (and, where age pensions are involved, a financial adviser) before the money moves.