Using Green Square equity to help adult children safely

Most parents in Green Square I meet don’t ask, “Can I help my kids buy?” They ask, “How do I help without blowing up my own retirement or betting the Zetland apartment I worked 20 years for?”

Helping adult children using equity from your Green Square property means either:

1. Offering a family guarantee backed by your apartment; or
2. Releasing cash-out equity and gifting or lending it to them.

The smart move is not which option you pick; it’s how you cap risk, keep buffers and structure things so you can sleep at night.

High‑density areas like Green Square require more conservative equity and buffer rules.

The real risk: not the bank, it’s your future self

A recent Green Square couple I worked with, mid‑50s, owned a Zetland apartment worth about $1.2m with a $350k loan. Their daughter needed help bridging a deposit gap for a $900k unit closer to work.

Their first idea? “Let’s just guarantee the whole thing.”

What I told them was simple: the bank will usually let you do more than is safe. Your job is to decide your own red lines first.

For Green Square and Zetland apartments, there are three non‑negotiables I come back to again and again:

1. Conservative LVR – total debt against your apartment should generally stay at or below ~70–80% of today’s realistic value.
2. 6–12 month buffer – hold at least 6–12 months of “stressed” living costs plus all loan repayments in cash or a true offset, not in redraw. (See /insights/build-six-twelve-month-buffer-green-square-apartment.)
3. Clean, purpose-based loan splits – each equity release split for each child, deposit or cost bucket should be clearly separated for tax and future flexibility.

If any of those three break, I tell clients to pause.

Two main ways to help: guarantee vs cash-out

1. Family guarantee using your Green Square equity

A family guarantee (often from parents) allows your child to buy with a smaller cash deposit by using your property as additional security instead of paying LMI.

Key features in practice:

• You give the bank a limited guarantee backed by a slice of your Green Square or Zetland equity.
• Your child takes the loan and makes the repayments.
• If they default badly enough, the bank can come after your guaranteed portion.

The critical word here is limited. You want the guarantee capped to the smallest slice that gets the job done.

Numbers example: Zetland guarantee structure

• Your Zetland apartment: value $1.1m, existing loan $300k.
• Child wants to buy: $850k property.
• They have: $60k genuine savings.

Indicative bank view (numbers rounded, for illustration only):

• Target 20% deposit + costs (~5%): $212.5k.
• Shortfall after their savings: about $152.5k.

Instead of:

• Child borrowing 95% and paying LMI, you:
• Offer a limited guarantee covering that $152.5k plus a bit of buffer.

Total exposure on your apartment after the guarantee still needs to sit under your own safe LVR cap (for many of my clients, that’s no more than 70–80% across all guarantees and loans).

Pros of a family guarantee

• Child owns 100% of the property from day one.
• Helps them avoid LMI, which can easily be $15k–$30k on an 85–95% lend.
• You don’t need to move cash out of your offset or investments.

Cons of a family guarantee

• Your exposure is open-ended until the guarantee is released.
• If your child splits up with a partner, loses a job or over-gears later, your apartment is part of the clean‑up.
• Harder to keep things emotionally clean between siblings (“Why did you guarantee more for them than for me?”).

My rule of thumb: guarantees can be fine if they’re tightly limited, time‑bound and there is a clear plan to release you once your child’s LVR falls below 80%.

2. Cash-out equity and then gift or loan

The other path is to top up your own loan and hand your child cash for their deposit and costs.

Mechanics look like this:

• Refinance or top‑up your Green Square loan to release equity as cash.
• Set up a new split (say, “Child 1 deposit loan”) so the purpose is clear.
• You decide whether that cash is a gift, a formal loan to your child, or part of a co‑ownership structure.

Example:

• Zetland apartment value: $1.1m.
• You decide your personal red line is 70% LVR.
• 70% of $1.1m = $770k.
• Current loan: $300k.
• Usable equity ceiling: $770k – $300k = $470k.

You might then choose to only use $200k of that, keeping plenty of slack for your own retirement, emergencies and potential future moves. (See also the safe-LVR framework in /insights/safe-lvr-buffer-rules-green-square-equity-big-life-costs.)

Pros of cash-out

• You control exactly how much you put in and when to stop.
• Cleaner from a relationship point of view: you can say “We are gifting $150k, equally, to each child when they buy.”
• If structured as a parent loan, you can secure it against their property, giving you options if circumstances change.

Cons of cash-out

• You carry the repayment burden, regardless of how your child behaves.
• You must be even more disciplined about your cash buffer.
• If the child’s property falls in value, there’s no automatic release valve for you.

A five‑number framework helps parents decide how much support they can safely offer.