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Ask Paul: Should I give my son $100,000 for his mortgage

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Q. I would like to give my son $100,000 to assist with his home loan.

Can I do this as a gift? If not, can I go guarantor for his home loan? How long am I tied in as guarantor? - Peter

A.: Hi, Peter, that is a good thing to be able to do for your son, but there are as many risks involved in this situation as wandering around a minefield.

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The possibility of you going guarantor frankly terrifies me: your obligations would be for as long as the home loan existed and I would not recommend you pursue this route without first speaking to a solicitor.

The gift also worries me.

If your son has a financial issue or even a relationship break-up, the generous gift of your money is at risk.

So my preferred option here is a documented loan to your son. In time to come you may choose to turn this into a gift for your son that need not be repaid, but a loan arrangement protects your son and the $100,000 from unexpected life events that may arise down the track.

Again, you should chat to a solicitor about this to be on the safe side.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the television show Money, radio, and most notably this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is Chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.
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