Tim McIntyre: Parental Gifts/Guarantees As Deposits
First home owner benefits are becoming harder to get in many states, with some governments changing eligibility criteria so that only purchasers of brand new properties qualify.
The new guidelines are believed to be an attempt to encourage the construction of new properties, which will boost the supply on the market and help to keep prices manageable.
But a brand new apartment or house and land package may not be suitable for all young buyers, so many are looking for alternate ways to stump up a deposit and buy their first home.
If you are referred to as ‘mum’ or ‘dad’, that’s where you might come in.
More and more parents understand that buying a home and paying off a mortgage is not as simple as it was 30 years ago, when many families could do so on one average income.
These days the ratio of average income to average mortgage has blown out somewhat.
Therefore, parents are willing to help however they are able, as their young-uns climb financial hurdles like rising house prices, outdated stamp duty brackets and other up front taxes and fees that can add tens of thousands to a purchase before they even get a chance to turn the front door key and limp over the threshold with their pockets turned inside out.
Even though many young buyers would be more than capable of servicing a loan, the majority have trouble saving a 10 or 20 per cent deposit upfront, especially in an expensive country like Australia, where wage growth is falling behind the rising costs of living.
That’s where the oldies come in.
Parents can pay a deposit as a gift, or use equity in their own home as security.
Most family homes if held for more than seven or eight years should have more than enough equity built up to cover a deposit for an entry level property.
Most banks have family equity products on offer, so parents can sign on as guarantor.
It’s just a matter of convincing the folks to part with that, in a day and age where plenty seem more into ‘spending the kids’ inheritance’ instead.
If you do get help from mum and dad, banks will still like to see evidence you can save.
Once your parents gift you the deposit, if you can leave the money untouched in an account and even add to it for three months or more, this will generally be enough to satisfy a lender.
Then, you have the chance to get your own place, while the folks can celebrate finally getting you out of the house.
Tim McIntyre is the senior real estate reporter for the Daily Telegraph and News.com.au.
Over the past decade, he has attained widespread knowledge of Australia’s many unique property markets and is an authority on all things buying, selling and investing.
His commentary appears every Saturday in the Daily Telegraph Real Estate lift out, as well as online at news.com.au