Helping the kids buy a property
Helping the kids buy a property
If you are thinking of helping the kids buy a property you will need some financial strategies to do so. 
The median price of property has been rising so quickly in Sydney and Melbourne that many young adults worry they will never be home owners.
The housing affordability issue isn’t just about home prices. There are social and generational factors because today’s young adults are less likely to be savers. So even as home-loan interest rates are at their lowest in more than 50 years, affordability is as much about a lack of a deposit as an inability to service repayments.
There are options for borrowers who have decent incomes and low deposits, and supportive parents.
First, most lenders will consider a family guarantee in lieu of a saved deposit. If you’re buying a $500,000 property, need $100,000 deposit and your parents have built substantial equity in their own property, they can offer it as security for the deposit.
A family guarantee works when the deposit is at least 20% of the purchase price. The lender accepts this security as the deposit, but the borrower is responsible for the mortgage repayments. If the borrower defaults, the lender recovers costs by selling the property, and they can take any shortfall from the security offered by the parents. Many home owners don’t want to risk losing their property wealth if their son or daughter fails to make mortgage repayments but despite this many parents are taking this risk to help the kids into the property market.
At Buyer Solutions, we have lots of clients exploring safe strategies to help their kids into the property market. We will post Mark’s second option for helping the kids next week.
For up to date information on what’s happening in real estate in Melbourne, contact Janet at jspencer@buyersolutions.com.au or 0418 101 146.
Buying property, Home buying, Housing Affordability, Housing Market, In The Media, Janet Spencer, Real Estate News & Opinion
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