Parents and family members are playing a more and more active role in helping younger family members to purchase their first home.
There are a number of ways that parents or relatives in a good financial position can help you to take your first step onto the property market.
Many families who have already paid off their mortgage or are in a strong financial position are lending money to loved ones either for the deposit or acting as the ‘bank’ for the overall mortgage of their first home. This is a great way for your parents or family member to give you a helping hand with your home loan if they feel that you will be reliable and able to make your payments.
It’s important that a legal agreement is made between you and the lending family member and that interest is charged on your loan so that it isn’t simply classified as a gift.
Acting as guarantor
If you are still on the path to saving for a deposit on your new home but already earn enough to make the home loan repayments, a family member acting as a guarantor can help you to secure your home loan earlier than you thought possible. Many lenders offer a parental guarantee or family pledge home loan feature that allows them to access the equity in their own property and use this as security over a portion or total cost of your home loan.
This solution could allow you to borrow more for your new home, significantly reduce your loan to value ratio and will save you money by reducing or allowing you to completely avoid paying Lender’s Mortgage Insurance.
If a loved one is in the financial position to do so, a monetary gift could help set you on the path to a deposit for your new home.
Living at home longer or staying in an affordable investment property
Another common way that your parents can help you to build for your first home is by allowing you to live at home longer, giving you more time and income freedom to save for a deposit. Alternatively, if your parents have an investment property, they could allow you to live in one of their investment properties for free or at a reduced rate.
There are a number of ways that your family can help you to build your first home; however, the most important thing is that both parties make an informed decision about this arrangement.
Our home loan experts are available to sit down with your parents, family member and yourself to go over your options and advise the best solution. We can then guide you through the process of making the arrangements and find you the best home loan to suit your unique needs.