Most Aussie parents (many grandparents too) aim to give their kids the best possible start in life— nowadays with exorbitant house prices, tough lending rules and not nearly enough savings for a deposit; this now includes assisting them to get at least one foot on the property ladder.
There are key factors preventing millenniums, Y-Gen and older adult-children from entering the property market. These are surging property prices and an inadequate deposit. Typically, meeting mortgage repayments isn’t an issue since they have always paid high rental amounts. Despite government assistance such as First Homeowner’s Grant, many simply cannot get off the proverbial rental wheel without additional family help.
That’s why; it’s now common for parents to investigate different ways to help their children get into the property market, thereby attaining a good quality asset and/or financial security.
Hervey Bay- A Great Choice for First Home Buyers
Hervey Bay is considered a high growth corridor with further population increases anticipated as even more people relocate, deciding to call the beautiful coastal city home. Huntingdale Woods (Urangan) offers a serene lifestyle option, and centrally located Flamingo Park (Kawungan) are two of Hervey Bay’s best kept secrets featuring a range of stunning brand-new house and land turnkey packages for sale. A turnkey package includes fencing, turfing & window coverings. First Home Buyers Grant is available— simply move in with your family and enjoy Hervey Bay’s carefree, tropical lifestyle.
Retirees- The Bank of Mum & Dad
Many older Australian homeowners, especially retirees of the infamous baby boomer’s generation now face becoming the ‘bank of Mum & Dad’ (or in some cases ‘grandparents-bank’). We’ve listed some tips specifically about how to help without being financially disadvantaged (or totally ruined) in the process
- Increased Deposit by Gifting Cash or Non-Genuine Savings
To boost savings, additional money can be gifted directly into the account but must be done so that the funds have been sitting in the account for at least three months to pass the genuine savings test executed by most banks.
- Provide a Personal Loan
Another option often preferred to a deposit gift, is to provide a personal loan that is forgiven on death. This may however affect the lending criteria since any parental repayments would be considered when assessing the loan. Financial and legal advice should be sought by both parties.
- Act as a Guarantor on Their Mortgage
Parents can help by using the equity in their own home and/or investment properties can take on the role of a guarantor over a portion of the loan amount. This method often increases the borrowing capacity and may remove the need to pay a deposit and/or expensive mortgage insurance.
Often banks will consider a guarantor loan of up to 20% of the mortgage and may also cover additional costs of stamp duty.
There are risks though— in a default situation, to cover any shortfall, the banks may pursue the parents for 20% of the loan amount after the property is sold. In some instances, banks will recoup their costs through the sale of the guarantor’s own property. It may not be a viable option for people with only the family home as their sole asset; but an ideal strategy for those with additional investment properties.
- Think Outside the Box
Another method to help family on to the property ladder is to buy an investment property which could initially be rented out, and later at a mutually suitable time, the title transferred to the adult child or family member.
- Teach Basic Budgeting & Savings Skills
Sometimes being generous with money is not a good idea but is disastrous all round! There are some adults that refuse to stand on their own two feet, leaching off their parents and are totally irresponsible.
Without resorting to well-meaning nosiness or downright, unwelcome parental intrusion; it’s important to contemplate how their financial habits and track record will impact if things go belly-up.
The last thing comfortable retirees need is to find that their own wealth position is severely negatively impacted because of their irresponsible adult-children. You may be better off ensuring that they know how to save and budget their money before you go helping them out.
Here are a couple of helpful ways to assist that don’t directly risk hard cash or assets—
- Allow your adult / family member to live at home rent-free for a specific period to save a higher deposit.
- Look after grandchildren so the money on child-care fees can also be saved.