Anecdotal evidence suggests lenders are being provided with letters from parents saying the money is being gifted to their children.

Lenders seek such letters as proof the applicant has sufficient funds for the deposit.

Joe Sirianni, executive director of mortgage broker Smartline, says if parents are looking for the funds to be repaid at some stage, a better option might be a documented loan agreement or a family equity guarantee.

"Putting anything in writing obviously carries with it the assumption that what is stated is completely true and correct," Sirianni says.

"It's dangerous and dishonest to advise a lender that funds provided to your child are a gift, if in fact you want that money repaid at some stage.

Sometimes the understanding is the money will be repaid when the child upgrades to a more expensive house and re-borrows, Sirianni says. He is aware of instances where people have provided a lender with written confirmation the funds are a gift in order to "get around" the bank's lending criteria and secure the loan.

If the letter says it is a loan, then the lender would take the expected repayments to the parents into account when assessing the affordability of the loan for the applicant and how much will be lent.

Sirianni says the biggest danger for the parents is if their child was to split with their partner. The house would be considered a joint asset.

The ex-partner would have written confirmation that the funds are a gift and not repayable. The partner could claim their share of the equity that exists in the property.

"As a result, parents could find that a large percentage of the funds they provided to their child for their future, is now in the hands of the child's ex-partner," Sirianni says.

The alternative to a gift or a loan agreement is to go guarantor for your child's loan.

It is a legally binding agreement with the lender where the guarantor undertakes to pay another person's loan should they be unable to do so. If a lender needs a guarantee, that is because the risks of lending to the borrower are significant.

Guarantors are usually liable for a portion of the loan if things do not turn out as planned.

@jcollett_money