25th May 2018
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How can I help my child get into the property market?
How can I help my child get into the property market?


With the ever-increasing price of property, younger people are finding it harder and harder to break into the market. Your financial support can make a big difference, and there are a number of ways you can help make their dreams a reality.

Can I loan my child money for a deposit?
The most obvious way to help your son or daughter get a foot in the door is to help them with their finances directly. Dipping into your savings or taking out a personal loan are the two most obvious options, especially if you’re confident they will use the money responsibly. One strategy is to offer to loan them the money for the deposit. The bank or lender will still need to assess whether they are suitable for a mortgage, but a deposit can go a long way to success. If you’re unsure how much you can afford to lend, use a budget calculator to help you do the numbers. That will put all your expenses and income into an easy-to-understand format. If you want to borrow money for the loan, a borrowing calculator can give you an indication of how much you may be approved for. It’s not a guarantee, but it’s a good indication. Organising a low-interest personal loan can be simple, especially if you have a solid credit history.

Should I refinance my current loan?
Refinancing a loan can be a good way to free up money. Giving your current mortgage a health check from time to time is always a good move. You may discover there are better features available today than there was the last time you looked at your home loan. The mortgage that helped you purchase your first home may not be your best option now, all these years down the track. Refinancing can also give you more money in your pocket. It may result in a better interest rate or smaller repayments. While it may seem easier to keep your home loan where it is, it is never a good idea to remain complacent. You could miss out on thousands of dollars in savings and prolong the life of your current loan. You may also want to consolidate all your loans into one mortgage. That, too, can save you a lot of money. Refinancing can also help you identify how much equity you have in your current mortgages.

What about helping my child out with a family pledge loan?
If you don’t have spare money or are worried about taking out another loan, a family pledge home loan can be a good option for your children. Family pledge mortgages allow you to use the equity in your own home to act as a guarantor for someone else, including your child. Equity is the difference between what your house is worth, and how much you still have to pay off. You can use that amount, or part of it, and act as a guarantor for your child’s mortgage application. Most banks only lend up to 80 per cent of the market value, so take that into consideration when calculating your equity. Your property will act as the deposit, which means your child could borrow up to 100 per cent of the value of the home they are looking to purchase. However, some banks and lenders prefer to lend against an investment property, and different banks and lenders may have different equity level requirements.

Are there risks being a guarantor?
While helping out a loved one is rewarding, there are always risks when you mix money and family. Being a guarantor through a family pledge loan or lending money directly is no exception. Relationships can become strained, especially if you are a guarantor and your child struggles with mortgage repayments. You may be putting your home at risk, which is why it is important to make these decisions with as much information, and as much objectivity, as possible.

Do I have to deal with a bank?
Not at all. Banks are not the only lenders that offer family pledge loans and allow you to act as a guarantor for your children. Award-winning lenders such as Mortgage House have helped Australians achieve homeownership for more than 30 years and without all the jargon and delays.  





    COMMENTS

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    Anne
    25th May 2018
    12:04pm
    Why didn't you also look at co-ownership as an option? I am exploring this to assist my son buy a property, while also protecting my interests. I can't afford to gift him the money...
    Cheezil61
    25th May 2018
    12:40pm
    I cannot believe the ridiculousness of this article. ..must be joking or what! Who even has savings?
    I'd expect most of us are battling to fund own living expenses (& trying to afford our own home/mortgages, etc) as well as expected to fund own retirement..now help our kids with a home or deposit for one?? How much income do you think we earn? Wage only stretches so far, I know I don't have a genie in a bottle granting me all I wish for!!.. These suggestions are not helpful at all. Have had stuff all help from my parents (& don't expect it)..what happened to working the arses off like we all have had to? Gggrrr
    johnp
    25th May 2018
    2:24pm
    I thought going guarantor is dangerous in that you could lose your own home to the likes of the banks, AMP etc. Problem also in todays labour market a lot of young ones are being ripped off on such as contract work by principals etc. So all your doing by contributing to a childs house cost ends up really just being a case of you subsidizing that unscrupulous employer or principal. The principal is under paying your child
    Circum
    25th May 2018
    3:50pm
    Children need to save up house deposits themselves.It is doable and character building.The argument that the current generation will not be able to afford home ownership existed in the 1970s.The only things that has changed is that houses were fairly basic and those basic houses have since been renovated and therefore cost more.By all means help the kids by babysitting etc while they do a second job.Personally I found helping fund some renovations has been beneficial after children made the effort to save for the deposit.

    Paying the deposit on behalf of a child might make you feel good,but could result in you losing more than your deposit when things go wrong eg,a couple breaking up.
    KB
    25th May 2018
    3:56pm
    Going guarantor is not a good idea no matter what relationship you have with your adult child. There are may things that could happen. Your son or daughter may be in a job and could be retrenched fall ill or have an accident As a guarantor you could become ill or have an accident and need the money Co- ownership is probably the best option. If you already rent then maybe yor child tent money to help cover repayments,
    Anne
    25th May 2018
    6:56pm
    All reasons why I am looking at co-ownership. I will still have an asset. I can draw against it if I need to for medical expenses. I can have my own space (granny flat) so that I am not living in my son's home.

    I know that disagreements can arise, but there are companies that can help draw up a good legal agreement now. I have discussed this with all three kids and they are all on board.

    One of them will get a boost without getting all of the assets.
    vincent
    27th May 2018
    7:45pm
    I get pretty tired about the younger generation moaning about how hard it is. Time for a reality check for the little blighters. Arrived in Aus in 1980, my first wage as a factoryworker was $190 a week Rent in those days from $75 to $90 for a half decent house. How is that as a percentage of your wage. I managed to scrape up a deposit within 2 1/2 yrs how, working on weekends for whatever I could get and then came the cruncher remember the interest of those days. No more said, it was a very modest home of about twelve squares. No ensuite or two bathrooms but it served us well. all you little wingers get to work, no eating out, takeaways, stop smoking and start saving. It is only till you get your deposit and you don't need a McMansion to live in. Set your sights within in your means.


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