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Posted by Hashching on Jan 29, 2018 2:38:02 PM
For first home buyers struggling to find their feet in the property market, help is at hand from the bank of mum and dad putting up to $85,830 on average towards their kids’ deposit, according to research.
Did you know 54 percent first homebuyers rely on their parents to help with their first property purchase?
Of course, there are more ways than one to get your child started on their real estate journey – such as, instilling financial discipline from an early age by teaching them the importance of budgeting and allowing them to stay at your place a little longer, so that they can save more to put towards their home loan deposit. You could always charge your kids a small rental or ask them to help with the utility bills, which will help them manage finances better in the future.
Financially speaking, most parents choose to gift cash as deposit to help their kids land quickly on the property bandwagon. In addition to the meaty grants offered to first-time buyers by various states, contributing cash towards your child’s deposit could not only help them negotiate better rates but also save thousands on lenders mortgage insurance (LMI). With minimal tax implications, this is one of the easiest ways to help your child buy their dream home.
Another way you can help your child is by using the equity in the family home to secure your child’s mortgage. Guarantor loans or family pledge loans are quite popular with first home buyers, who can borrow up to 100 percent of a property’s value by using the equity in their parents’ home as additional security. However, going guarantor on your child’s loan is a major financial responsibility; you would be liable for your child’s debt in case they default. It is, thus, recommended to take independent financial and legal advice before you decide to guarantee your child’s mortgage. Besides, signing up as a guarantor will significantly reduce your borrowing capacity in the future.
To reduce the risks, you could use an investment property to secure the loan instead of your family home or provide a capped guarantee for a more comfortable amount. It is best to speak with an expert mortgage broker to understand your options and their implications better. In fact, as parents, you must also advise your children to consult an expert before buying a property to make informed decisions.
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About HashChing
HashChing is a borrower-friendly online mortgage marketplace, a first of its kind in Australia. Powered by sophisticated algorithms, it is a tech platform that enables borrowers to access and compare broker pre-negotiated mortgage rates from over 60 lenders across Australia. Besides, HashChing offers on-demand broker services wherein you can choose from verified mortgage brokers in your area, connect with them and discuss your requirement from the comfort of your favourite screen. Recognised for changing the landscape of the mortgage industry across Australia, HashChing continues to innovate, helping Australians realise their foremost dream of buying a home.