Many people in Australia use negative gearing to build long-term wealth. It is, however, not…
Over the past few years, in Australia we have seen an increasing number of parents helping their children to buy a home.
Initially, this trend was driven by rapidly escalating property prices and the desire to help their children purchase a home whilst it was still affordable.
Of more recent times, with a more stringent approach to serviceability by Banks, the focus of parents has been more about reducing the amount borrowed to help make the repayments more affordable.
There are several ways parents can help their children buy a home, with each having pros and cons:
Parents can help their children buy a home - A non-repayable gift
Providing a Loan
If going down this path, to avoid issues and/or family disputes etc down the track, it is important to involve a solicitor to ensure the terms of the loan are properly documented.
(Generally, Banks do not favour Home Finance that is subject to multiple mortgages)
Providing a Guarantee
If considering taking an equity position to help your child purchase a home, it is essential to seek professional advice.
Take equity in the property
Place money in a Mortgage Offset Account
In a market of high property prices and low wages growth it is a natural desire of many parents to help their children buy a home.
However, it is important before taking this step to understand the ramifications of the different options available. To seek professional advice.
If you would like to learn more, don’t hesitate to call me