2 October 2014


Could this bright idea be the key?


The concept of parents lending money to their children to help with a property purchase is as old as time itself. It has always been around, but the pitfalls of such unsecured lending are great. Introducing the innovative P2C™ (Parent-to-Child) Mortgage: a combined credit and wealth management product designed to assist young Australians onto the property ladder and protect families with intergenerational wealth transfer.

The P2C™ wealth product enables parents to assist their children with a property purchase without seeking onerous bank guarantees which place the parents’ assistance and wealth in the grip of banks during a default.

Young adults are living at home longer than ever, finding it harder and more costly than ever to get onto the property ladder. With an increase in median house prices nationally and to more than $800,000 in Sydney, it is harder than ever to afford a starter home – without the assistance of family.

The P2C™ product looks to address the affordability gap between house prices and median income multiples – now at a staggering 5 times income. The P2C™ product is an attempt to protect parents’ wealth when they do assist their children, and at the same time enable children to enter the housing market without the need for asking mum and dad to put their wealth at risk through bank guarantees, or further mortgages against the parental primary or other residences.


The P2C™ product formalises the assistance process between parent and child, documenting the arrangement, registering a mortgage on the security property, and then independently managing the assistance to ensure that it is repaid in accordance with the agreed terms.

Parents have traditionally gifted monies to their child which can leave them exposed from an estate planning and wealth protection point of view, for example, in the event of a subsequent marital or deceased estate dispute. The P2C™ product is specifically designed to protect the parents’ “investment” from such instances without exposing their assets or credit file profile to any risks associated with their child running into difficulty with repayments. The parents however can still provide the much needed assistance for their children with interest rates starting as low as 3.4 percent per annum.


Parents are able to assist their child with the full purchase amount, or they can assist in part to make up the balance behind the child’s own loan, possibly saving their child tens of thousands of dollars in Lender’s Mortgage Insurance premiums.


The parent can decide the amount they wish to lend and the interest rate they wish to set (a minimum of CPI + 0.5%). Then they make an investment in La Trobe Financial’s independently rated and licensed investment fund with over 10,500 other investors and $773m in funds under management. The parents' investment might be for the full amount or just part of the property purchase price. The parents’ contribution will be secured by way of a registered mortgage, ensuring that they have rights to the money at all times in the event of non-payment by the child following a marital or deceased estate dispute. In the case of a part funding, the parents' investment will rank second behind La Trobe Financial Services first mortgage loan. Because the parents' investment is formalised, and can be subsequently waived or enforced, there is no risk of loss from the child’s marital separation or dispute. A parent can make their investment individually, collectively with other family members and via company or family trust entities. They will need to obtain independent legal, taxation and financial advice.

Whatever market you’re in... we hope it’s profitable.

Best regards,
Randal Williams, Chief Wealth Management Officer &
Chris Andrews, Head of Funds Management
La Trobe Financial Asset Management Limited

La Trobe Financial is one of Australia's leading independent credit specialist Fund Managers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 123 staff and has managed over AUD$10Billion covering over 100,000 investment grade assets since inception in 1952.

Copyright 2014 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer

The following awards and ratings were given to the Pooled Mortgage Option within the La Trobe Financial Mortgage Fund and may be viewed on our website

Ratings And Awards

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La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. The PDS is available on our website www.latrobefinancial.com or by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.
- The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund and may be lower than expected. Investors risk losing some or all of their principal investment. The investment is not a bank deposit.
- Past performance is no guarantee of future performance.
- Withdrawal rights are subject to liquidity and may be delayed or suspended.
- The award and ratings were given to the Pooled Mortgages Option within the La Trobe Australian Mortgage Fund.
- Any rating is only one factor to be taken into account in deciding to invest.

La Trobe Financial Services Pty Limited - Australian Credit Licence Number: 392385
La Trobe Financial Asset Management Limited - Australian Credit Licence Number: 222213

1. Zenith's "recommended" rating indicates that it has high confidence in the manager meeting its objectives. The Zenith Investment Partners ("Zenith") ABN 60 332 047 314 rating referred to in this document is limited to "General Advice" (as defined by section 766B of Corporations Act 2001) and based solely on the assessment of the investment merits of the financial product on this basis. It is not a specific recommendation to purchase, sell or hold the relevant product(s), and Zenith advises that individual investors should seek their own independent financial advice before investing in this product. To view the relevant research information, please visit www.latrobefinancial.com The rating is subject to change without notice and Zenith has no obligation to update this document following publication. Zenith usually receives a fee for rating the fund manager and product against accepted criteria considered comprehensive and objective.
2. SQM Research - 4 stars to 4.25 stars - superior, suitable for inclusion on most Approved Product Lists. To view the relevant research information, please visit www.latrobefinancial.com This rating will not take into account your, or your clients' objectives, financial situation or needs. It is up to investors to consider whether specific financial products are suitable for your objectives, financial situation or needs. Research houses receive a fee from La Trobe Financial for rating the product.
3. Lipper Leaders Rating Total Return (Score – 5) Lipper Ratings for Total Return reflect funds’ historical return performance relative to peers. The ratings are subject to change every month. The highest 20% of funds in each peer group are named Lipper Leader or a score of 5 for Total Return. Lipper Leader ratings are not intended to predict future results and does not guarantee the accuracy of this information. More information is available at www.lipperweb.com. Thomson Reuters Copyright, All Rights Reserved.
4. Australia Ratings (AFSL 346138) makes every effort to ensure the reliability of the views and rankings expressed in its reports and those published on its websites. Australia Ratings research is based upon information known to it or which was obtained from sources it believed to be reliable and accurate at time of publication. However, like the markets, it is not perfect. This report is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore discuss, with their financial planner or advisor, the merits of each rating for their own specific circumstances and realise that not all investments will be appropriate for all subscribers. To the extent permitted by law, Australia Ratings and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information within the report whether or not caused by any negligent act or omission. If the law prohibits the exclusion of such liability, Australia Ratings hereby limits its liability, to the extent permitted by law, to the resupply of the said information or the cost of the said resupply.