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2Be’s Equity Advantage is a new loan option which has distinct advantages for parents who want to help their kids onto the property ladder.
Setting up the Bank of Mum and Dad for success
15 August 2022
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4 minute read
As house prices have risen in recent years, first home buyers have increasingly relied on financial assistance from their parents to get onto the property ladder.
Parents will often provide funds for a deposit in the form of a gift, a formal or informal loan, or by acting as a guarantor to a bank loan.
Parental guarantees have the benefit of requiring no cash up front. The downside is that parents assume their child’s debt obligation should the child default.
"In contrast, 2Be Equity Advantage is a home equity loan direct to the parents, allowing families to structure their arrangements in a way that works both in the present and for future scenarios,’" CEO of 2Be, Dr Jenny Fagg said.
Banks may have policies preventing parents from providing more than one parental guarantee. With Equity Advantage, a parent is free to distribute loan proceeds as they see fit, including across multiple children.
Dr Fagg warned that parental guarantees can be triggered unexpectedly during times of personal crisis or a major life event, particularly a relationship breakdown.
"Your children will always be your children. But, sadly, their partners may not," Dr Fagg said.
"As hard as it is, you should plan for the worst and hope for the best."
Under typical parental guarantees, if the child is a joint borrower with a partner and the relationship ends, the parents’ guarantee remains in force for the ex-partner's debt.
"If the child is unable to repay the guaranteed loan, and the sale of the child’s house does not cover the debt, the parents’ home may have to be sold to meet the shortfall, increasing stress on all the family,’’"Dr Fagg said.
To be eligible for 2Be Equity Advantage:
- Youngest borrower must be between 55 - 75 years young at the time the loan is entered into
- Own a property with a value of at least $1m, with little or no debt against it
- At least $500,000 of other significant net assets
- Clean credit history
- Australian Citizen or permanent resident. 2Be also accepts NZ citizens with a Special Category Visa
No proof of income or job status is required, and the funds can be used for any legitimate purpose such as home renovations or helping your kids.
Unlike the reverse mortgages of old, which gained a negative reputation after some uninformed homeowners found themselves in over their heads, new options like Equity Advantage also include a guarantee that protects borrowers from owing more than their home is worth.
"At 2Be we offer a five-year fixed rate loan with a fixed interest rate, which provides customers with certainty as to the amount they will owe at the end of the term," Dr Fagg said.
In addition, 2Be offers free resources for families helping to fund a child’s home deposit, including templates and checklists. These educational tools help customers navigate the sometimes difficult conversations necessary to help preserve family relationships and assets.
"It’s often hard to discuss delicate financial matters between parents and their children, but it is always best to have these conversations up front to set yourselves up for the best chance of success," Dr Fagg said.
2Be offers a referral program for experienced accountants and advisers. If you’re interested in referring potential clients to 2Be you can find out more at 2Be Professionals or email 2Be at
Helping Australians between the ages of 55 and 75 to use the equity in their home to help their children—and...
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