With the housing market running pretty hot at the moment, a lot of first home buyers are looking to get into a new home. They might need a bit of a helping hand getting onto the property ladder though, so how can you help your children buy their first home?
The deposit is usually where most first home buyers struggle – paying 20% up front is no easy feat. So if you have the cash, a loan might be a good way to help your child pay the deposit on their first home.
Even though they’re family, it’s a good idea to get everything in writing, including how and when they will make repayments to you. It’s important to make sure that you won’t be putting yourself at a disadvantage financially by providing such a loan. Your retirement might still be in the distant future, but you need to factor that into your financial planning.
If you’ve got some money stashed away for your children’s inheritance, you could gift this to them to put towards their first home. The earlier they can get onto the property ladder, the better, so giving them their inheritance early can be a good option.
Gifting is also less risky to you, and banks prefer this method as their clients (your children) aren’t responsible for paying anything back. Again, it’s important to make sure you’re in a position to give such an amount to your children first.
Act as a guarantor
Another way to help your kids get onto the property ladder is to act as a guarantor on their first home purchase. But this means that if your child ends up defaulting on their mortgage repayments, the bank will look to you to repay the loan.
Because of this, it’s important that you seek professional legal and financial advice before going ahead with this arrangement. If you end up needing to put your own home up as collateral, that’s not going to put you or your children in a good position.
This one is fairly common as it works well for both parties. Buying a property with your child means that the property will be under your name as well, protecting your investment and allowing you to also capitalise on any gains.
The benefit of this arrangement is that everything is clearly laid out, and you can track whether mortgage repayments are being made. Make sure that all the paperwork specifies how much each party will pay, and what will happen if the property were to be sold.