Helping the next generation into the property market
Case study: A strategic family gaurantee appraoch
At FMD, we often meet clients who want to help their children into the property market but aren’t sure how best to go about it—especially if their wealth is tied up in their home rather than sitting in cash.
This case study focussed on a couple in their early 60s who approached us for guidance on how to support their daughter and her partner with buying their first home. The couple were asset-rich, with significant equity in their family home, but didn’t have spare cash to gift. What they did have, however, was a strong desire to help—and full confidence in their kids’ ability to handle money responsibly.
Understanding the Family's Needs
During our initial conversations, we explored both the parents’ and the children’s financial positions:
The daughter and her partner were in a strong position: two good incomes, no children or dependents, and $150,000+ in savings.
The main barrier? They both carried HECS debts and, even with their savings, were limited in how much they could borrow without paying a significant Lenders Mortgage Insurance (LMI) premium.
Based on income and savings, the couple could borrow around $1.15 million, which would allow for a purchase around $1.225 million after costs. However, the required loan would be 93% of the purchase price—well above the 80% LVR threshold that avoids LMI, and even above what many lenders will allow once LMI is added.
The couple had their eyes on properties in the $1.3–$1.4 million range—homes that would better suit their lifestyle and offer longevity, reducing the need to upsize again in 3–5 years.
Our Recommendation
After reviewing both generations’ financial positions, we proposed a two-part strategy:
Family Guarantee Loan: Rather than gifting cash, the parents could offer a limited guarantee on the children’s loan, using equity from their home as additional security. This reduced the loan-to-value ratio below 80%, eliminating the need for LMI (which would have added over $50,000 in cost) and allowing the children to maximise their borrowing power safely.
Clear the HECS Debt: We also suggested that the children consider using some of their savings to pay off their HECS debts. This significantly improved their borrowing power—by approximately $275,000—and opened up the opportunity to purchase a higher-quality, longer-term home that better met their goals.
The Outcome
With the guarantee in place and HECS debts cleared, the children were able to confidently purchase a home for $1.385 million—more than $150,000 above their original target—without stretching their monthly repayments uncomfortably or compromising on location or space.
The parents retained full ownership of their home, with the guarantee limited to a portion of the children's loan and structured so that it could be released down the track as the loan was paid down or the property appreciated.
Why It Worked
This approach worked because it was tailored to the family’s unique circumstances: parents with equity but limited cash; children with solid incomes but a few hurdles to overcome; and a foundation of trust between generations.
What could have been a frustrating experience for the children—limited borrowing capacity, potential compromises on property type, and unnecessary costs—became a smooth and empowering process with the right advice and strategy in place.
A Final Word
Helping adult children into the property market doesn’t always mean handing over large sums of money. With the right guidance, families can use existing resources—like home equity—strategically and safely.
If you're considering ways to support your children or grandchildren in buying a home, talk to your FMD adviser. We can help you explore your options and find the right path forward—one that protects your interests and sets the next generation up for success.
General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.