Bank of Mum and Dad

Bank of Mum and Dad Fifth Largest Lender in New Zealand

Consumer magazine recently reported that parents are the fifth biggest lenders in New Zealand, lending $22.6 billion in loans.  The Bank of Mum and Dad is the fifth biggest owner-occupier lender in New Zealand – Consumer NZ

We are frequently asked to assist with this process, and it is important that both sides are clear as to what their intentions are.  Is it a loan or a gift?  What are the terms of repayment and is interest being charged?  What happens if the children separate, does the child-in-law get to keep their half or does it need to be repaid?  Is it better for parents to guarantee a loan or be a co-borrower of some of the debt? Should the parents be indemnified if they end up having to make any payments?  Should they be a co-owner but then how does the Brightline test impact if they get bought out of their share at a later date? Documenting intentions clearly with an informed understanding of what happens if something goes wrong as well as the impact of the Brightline test is important.  We are happy to discuss the issues and provide up front advice about possible outcomes to provide you with protection.