The Best Ways to Unlock BOMAD (the 'Bank of Mum and Dad')

A practical guide to intergenerational financial support in New Zealand

The 'Bank of Mum and Dad' (BOMAD) has become one of New Zealand's largest unofficial financial institutions. For many first home buyers, a contribution from parents can be the difference between watching house prices from the sidelines and actually getting the keys. But like any serious financial arrangement, BOMAD works best when everyone goes in with open eyes, clear documentation, and a proper plan.

Below, we break down the three ways BOMAD actually works in New Zealand (gift, loan, and guarantee), how banks treat each one at pre-approval, and how parents can help without putting their own retirement or family relationships at risk.

Gone are the days when a casual handshake settled things. With median house prices sitting well above $800,000 in Auckland and significant deposits required across most of the country, parental contributions now regularly run into six figures. The stakes are too high for loose agreements and assumed understandings.

Why BOMAD Matters

Consumer NZ research from 2022 estimated the cumulative value of parental financial support to home buyers at $22.6 billion, enough to rank BOMAD as New Zealand's fifth-largest source of owner-occupier lending, behind ANZ, ASB, Westpac, and BNZ, but ahead of Kiwibank and TSB combined. Around 14% of all families had contributed, with the average support sitting at $108,000. Three out of five contributing parents did not expect to be repaid.

Mortgage brokers report even higher rates of involvement among the people walking through their doors. OneRoof reporting has suggested 60 to 70% of first home applicants arrive with some form of family assistance, whether as a direct cash contribution, a guarantee, or subsidised accommodation while saving.

The broader backdrop makes BOMAD's role even more significant. New Zealand is entering what some economists call the 'Great Wealth Transfer.' A JBWere report estimated inheritances in New Zealand at around $27 billion in 2024, growing to a projected $1.6 trillion by 2050, driven overwhelmingly by residential property. BERL analysis put the figure at $1.1 trillion over the next 20 years. Either way, the sums involved are vast, and BOMAD is increasingly how families choose to bring forward some of this wealth to the point where it can make the most difference.

More Than Just Money

The obvious benefit of BOMAD is financial: entering the property market earlier, potentially years ahead of those without support. Detailed NZ-specific data on post-purchase outcomes for BOMAD recipients is limited, but Australian figures from Finder's 2025 First Home Buyer Report found assisted buyers had 41% more savings remaining after purchase and took less time to accumulate a deposit. NZ mortgage advisers report similar patterns here.

For parents, the satisfaction of helping a child onto the property ladder can be real and significant. But it is not without risk. Consumer NZ found three in five parents providing deposit assistance did not expect repayment, suggesting the default mode is gifting rather than lending. Before making a contribution of any size, parents need to be confident their own financial position remains secure. Helping a child at the expense of your own financial security risks derailing your retirement plans. After all, you cannot pour from an empty cup.

For families navigating the emotional side of all this, whether grown children are moving back home to save or parents are weighing up whether to spend the inheritance instead, the decisions go well beyond dollars and cents. Open conversation early is worth more than any legal document, though you will want both.

What if You Don't Have BOMAD?

Not everyone has access to family wealth, and no article about BOMAD should pretend otherwise. If parental support is not available to you, the path to homeownership is harder, but it is not closed.

Practical alternatives worth exploring include the First Home Loan (which allows eligible buyers to purchase with as little as 5% deposit through participating banks), your KiwiSaver first home withdrawal (available after three years of membership), and the low-deposit lending allowances banks can offer under the Reserve Bank's speed limits. CoreLogic data shows 44% of all first home buyers in early 2025 had less than a 20% deposit, proving this is now a well-trodden path rather than an exception.

The current market is also relatively favourable. First home buyers made up a record 26.1% of property purchases in 2024, helped by more listings, less competition from investors, and lower mortgage rates following the OCR cuts through 2025. The median price paid by first home buyers fell from $719,000 in 2022 to $698,000 in 2024. Focus on what you can control: your savings rate, your income trajectory, your KiwiSaver contributions, and your financial literacy. Every dollar saved and every smart financial decision is a brick in your own foundation.

BOMAD Practicalities: Gift, Lend, or Guarantee?

While the name sounds light-hearted, the decisions involved can be anything but. Unlike a traditional bank, BOMAD rarely requires a credit check, legal agreement, or repayment plan. So what could possibly go wrong? Quite a lot, as it turns out.

It is worth understanding upfront how banks view each form of BOMAD at the pre-approval stage. A documented gift strengthens the application because the money adds to the deposit without creating a liability. A documented loan, by contrast, is treated as debt and reduces borrowing capacity. An undocumented sum of uncertain origin can delay the entire process while the lender asks questions. The structure matters, and ideally it should be settled before you start talking to a bank.

Gift

This is the simplest and most common form of assistance, particularly for deposits. A clear, unconditional gift strengthens a home loan application because the money is not treated as debt. Banks will require a gift letter (sometimes called a statutory declaration) confirming the funds carry no expectation of repayment.

New Zealand abolished gift duty in 2011, so there is no tax on the gift itself. However, parents should be aware of the residential care subsidy asset test. If a parent enters residential care and Work and Income reviews their financial position, large gifts made in the preceding five years may be 'clawed back' into the asset assessment. This is worth discussing with a financial adviser, particularly for parents approaching or past their late sixties. For those already thinking through retirement fears and how to overcome them, the care subsidy interaction is one more reason to plan ahead.

The bigger risk sits with relationship property law. Under the Property (Relationships) Act 1976, a gifted sum used to purchase a shared home can become relationship property, subject to equal division if the child's relationship ends after three years or more. Even if the parents intended the gift solely for their child, the default legal position may not protect it. A contracting-out agreement (sometimes called a 'prenup') between the child and their partner is the most reliable way to ring-fence parental contributions. Legal advice for both sides is well worth the cost.

Loan

A formal family loan can work well when parents want to help but also want their money back eventually. It allows for more flexible terms than a bank, and, crucially, a documented loan maintains a clear claim over the funds if things go sideways, whether through relationship breakdown, financial difficulty, or a change of heart.

If you choose this route, use a Deed of Acknowledgement of Debt or similar legal document. Outline the loan amount, repayment schedule, interest (if any), and what happens in unforeseen circumstances. This is not just about protecting the parents. It is about developing financial responsibility in the adult child and preventing the kind of awkward silences at family dinners no one wants.

One thing our mortgage advisers commonly see: undocumented family loans surfacing late in the approval process. The bank cannot assess the borrower's true obligations without paperwork, and in some cases will treat the unverified funds as a liability, reducing borrowing capacity right when the buyer thought they were across the line. Get the documentation sorted before you apply, not after.

Guarantee

In this arrangement, parents use their own property as additional security for a portion of their child's home loan. This can help the child avoid Lenders Mortgage Insurance (LMI) or borrow a larger amount. It is common when parents have property equity but limited liquid cash.

To make this concrete: say your child is buying a $700,000 property and has saved a 10% deposit ($70,000). The bank wants a 20% deposit ($140,000) to avoid LMI. The parents, who own a home worth $900,000 with $200,000 remaining on their mortgage, can offer a limited guarantee over the $70,000 shortfall. Their property acts as additional security for the gap between the child's deposit and the bank's preferred threshold. Some banks will allow a limited guarantee covering only the deposit shortfall rather than the entire loan.

While this can be effective, the risk to parents is real. If the child defaults on the loan, the bank can pursue the guarantor's property to recover the debt. In the worst case, the bank can force a sale of the parents' home. Both parties should obtain independent legal advice. 'Independent' here means separate lawyers, not one lawyer acting for everyone.

Regardless of which form BOMAD support takes, the message is the same: put it in writing. Formal agreements and independent legal advice protect everyone involved and prevent the sort of misunderstandings that fracture families.

Making the Most of BOMAD

For Parents

1. Assess your own position first. The airline analogy applies: put on your own oxygen mask before helping others. Before extending a helping hand, make sure your retirement planning, your emergency fund, and your contingency for possible aged care costs are all on solid ground. Helping a child at the expense of your own financial security benefits nobody in the long run.
2. Define the support clearly. Is it a gift, a loan, or a guarantee? Put everything in writing. A casual chat over a cup of tea does not cut it when hundreds of thousands of dollars are at stake.
3. Consider the relationship property angle. If your child is in a relationship (married, civil union, or de facto for three years or more), the default position under the Property (Relationships) Act is equal division of the family home. A contracting-out agreement can protect your contribution. Without one, your gift could end up benefiting someone you did not intend it for.
4. Encourage financial literacy. Use this as a chance to discuss budgeting, saving, investing, and the real responsibilities of homeownership. BOMAD should accelerate independence, not delay it. For ideas on how to start those conversations earlier, see our guide on teaching kids about money.
5. Think about fairness. Support to one child can create tension with others. Consider how you would handle similar requests from siblings, and have the conversation proactively rather than reactively. Passing on wealth to the next generation works best when it is planned across the whole family, not piecemeal.
6. Get professional advice. A financial adviser and a solicitor can help you understand the implications and structure the arrangement to protect everyone involved. This applies whether the contribution is $50,000 or $500,000.

For Adult Children

1. Treat it with respect. This money did not appear from thin air. Your parents may have sacrificed travel, renovations, or a more comfortable retirement to help you. Treat it with the seriousness it deserves, regardless of whether repayment is expected.
2. Formalise the agreement. Insist on clear, written terms, even if it feels awkward. This is not a sign of mistrust. It is a sign of maturity, and it protects your relationship with your parents over the long haul.
3. Understand what the bank needs. Your mortgage lender will ask about any family contributions. A properly documented gift letter or loan agreement will make the process smoother. Undocumented money in your bank account may actually slow things down or reduce how much you can borrow.
4. Pay it forward. Not necessarily to your parents, and not necessarily in cash. Build the financial habits and knowledge to become resilient on your own terms. One day you may be in a position to do the same for the next generation.

The Bottom Line: BOMAD

The rise of BOMAD reflects something beyond family generosity. It is a symptom of a housing market in which the deposit hurdle has outpaced what most young people can save unaided, even with strong incomes and disciplined saving. In 2002, the average house price in New Zealand was $186,000, roughly six times the average income. Two decades later, median prices reached $890,000 at their peak, more than 15 times the median income. BOMAD is not a solution to this problem. It is a workaround, and one with distributional consequences: families with property wealth can give their children a leg-up, while those without cannot.

But within your own family, done well, BOMAD can catapult the next generation into homeownership, relieve pressure, and build long-term wealth across generations. Done poorly, it can create resentment, financial risk, and relationships scarred by unspoken expectations. The key ingredients are honesty, documentation, professional advice, and a clear-eyed understanding of the risks on both sides.

If BOMAD involves six figures, property guarantees, or uneven support between siblings, professional advice is especially valuable. At Become Wealth, our experienced mortgage advisers and financial planners work with both sides of the BOMAD equation, helping families structure support in a way that protects everyone's interests and aligns with long-term goals. Get in touch with our team to book your complimentary initial consultation.