Bank of Mum and Dad Calculator: Gift vs Loan vs Equity Share
Parents helping with a house deposit? Compare what a gift, a family loan and an ownership share each mean — for both generations.
Parents helping a child buy property have three structures to choose from: a documented gift (simplest, nothing returns), a written family loan (the money comes back on a schedule, but lenders count the repayments), or an equity share (the parents own a percentage and share the growth) — and the biggest mistake is choosing none of them in writing.
Last updated August 2026
The bank of mum and dad is one of the biggest lenders in Australia, and most of its 'loans' are handshakes. Before money moves, the structure question deserves ten minutes: is this a gift, a loan to be repaid, or is the parent buying a slice of the property? This calculator puts numbers on all three, side by side.
Enter what the parents are contributing and the purchase price, and compare: what a family loan's repayments look like, what percentage an equity share represents, and what that share could be worth down the track.
How this calculator works
- The gift column is simple by design: the child keeps the full amount and everything it grows into, and the parents' banks statements plus a signed gift letter keep the lender happy. The real cost is invisible — no legal claim if the child's relationship breaks down, and possible pension (Centrelink gifting) consequences for the parents.
- The loan column amortises the contribution at the rate and term you set — 0% interest is common for family loans — and shows the monthly repayment and total repaid. Lenders treat those repayments as a liability, which reduces how much the child can borrow, and family courts only respect the loan if it's properly documented.
- The equity column divides the contribution by the purchase price to get the parents' ownership percentage, then projects the property forward at your growth assumption to show what that share could be worth. The parents go on the title (usually as tenants in common), which means a co-ownership agreement, possible land tax, and CGT on their share when it's sold.
A worked example: $150,000 toward a $750,000 house
As a gift, the child simply has $150,000 more deposit, borrows less, and may skip lenders mortgage insurance — the biggest practical win of the three. The parents' protection if things go wrong: none.
As a 0% family loan repaid over 10 years, the child repays $1,250 a month and the parents get their $150,000 back in full. The catch is serviceability — the lender counts that $1,250 like any other debt, cutting the child's borrowing power by six figures.
As an equity share, the parents own 20% of the property. If it grows at 5% a year, the house is worth about $1.22 million in 10 years and their share about $244,000 — a $94,000 gain, but one that comes with title, tax and exit questions a gift never asks.
Australia and the United States
The math is the same wherever you buy. For country-specific tax and legal detail — stamp duty and CGT in Australia, closing costs and capital gains in the US — read the guide for Australia or the United States.
Good to know
- The projection uses simple compound growth at the rate you choose. Property does not grow in straight lines, and past growth is no guarantee.
- The loan column assumes equal monthly repayments (principal and interest). Interest a parent charges may be assessable income; get tax advice.
- Centrelink gifting rules, lender policies on family loans, land tax and CGT all vary with circumstances — none are modelled here.
- Educational comparison — not legal, tax or financial advice.
Frequently asked questions
Should parents gift or lend a house deposit?
A gift is simpler and maximises the child's borrowing power; a loan protects the parents — it survives a relationship breakdown and comes back on a schedule. The deciding questions: can the parents afford to never see the money again, and is there a partner in the picture? If protection matters, document it as a loan.
Does a family loan reduce how much the child can borrow?
Yes. Lenders count the family loan's repayments as a liability like any car loan, so a $150,000 loan repaid over 10 years can cut borrowing power by more than the loan adds in deposit. Some lenders accept a repayment-free arrangement if it's documented; a gift avoids the issue entirely.
Is money from parents legally a gift or a loan?
In Australia the courts start from a presumption that money from parents to a child is a gift ('presumption of advancement') — so an undocumented 'loan' is usually treated as a gift in a divorce or dispute. If it's meant to come back, it needs a written loan agreement, signed before the money moves, ideally with independent advice on both sides.
What does an equity share mean for the parents?
They own a percentage of the property — this calculator works it out from their contribution — recorded on the title as tenants in common. They share the growth, but their share can attract land tax, is a CGT asset when sold, and needs a co-ownership agreement covering who pays what and how they exit.
Do gifted deposits affect the pension?
They can. Centrelink counts gifts above the allowable amounts ($10,000 in a year, $30,000 over five years) as deprived assets for five years, which can reduce age pension entitlements. Parents near pension age should get advice before gifting large sums.
What should a bank of mum and dad loan agreement include?
The amount and purpose, the interest rate (even if 0%), the repayment schedule, what happens on default, sale of the property or a relationship breakdown, and whether the loan is secured (a registered second mortgage or caveat). Signed by everyone, before settlement — our loan agreement checklist covers it clause by clause.