Parents Help Kids to Buy!
Mums and dads are paying their children to leave home and get their toes in the property market. That is the opinion of Toowoomba real estate agents, Ian Knight & Tiffany Krause of RE/MAX Success. Our office is experiencing this more and more as parents are now providing the deposits for their children to enable them to purchase their first home.
Andrew Searle of Searle Financial Services reiterates that with the rising cost of buying property in Australia, we’re seeing more and more parents assist their children by providing a gift or a guarantee.
“I see approximately 20-25% of first home buyers receive some form of assistance by providing a deposit or a guarantee that the banks can then lend up to 100% against the purchase price without mortgage insurance being charged. The loan can be structured in such a way that the guarantor’s exposure is no more than 20% against the purchase price. It’s essential for the guarantors and the borrowers to be well informed about the pros and cons of entering into such an arrangement,” Mr Searle confirmed.
Mr Knight indicated that national statistics clarify a whopping 80% of first home buyers are given some form of financial boost by their parents. This can be in the form of a deposit, interest free loan or security of the family home. This statistic is growing annually. A decade ago it was well below 10% and considered rare for parents to assist like this whereas for many today it is the only way children will be able to gain a step onto the property ladder and make that transition from living at home to home owner.
With a society where the disposable income is now much greater, you would think this would make it easier to save. The younger generation like the finer things in life with lenders observing the lack of saving power by first time home buyers where the only chance of purchasing a property is through parent power!
Mr Knight reiterated that in transactions he has undertaken over the last few months at least 1 in 4 has had some form of financial assistance in order to allow the finance approval to occur. He concluded that this seems to be the trend in society today.