Helping your child into their first property

Every child eventually leaves home. It’s part of the process with many parents likely to feel unsure of how their child will be able to afford a home of their own. It will take years, especially in Sydney. First they need to find a job and then save for a deposit.

The very lucky ones are given a house, bought and paid for by their parents. But for the rest of us, the process is far longer, with hard yakka and discipline. A good deal of us often give up on home-ownership along the way and settle for a property to rent. They do so for the flexibility and minimal responsibility it offers, even though they would have a larger net worth over time if they had bought a property.

And with first home buyers finding it difficult to get into a property, parents may have to assist their children buy their first property.

In this article, you’ll find ways to assist your child leave home and get into a property of their own.

  1. Teach Good Habits

Teach your child from an early age about saving. Help them get into the habit of saving for more meaningful purchases. And teach them about paying bills, insurance, stamp duty and all the stuff associated with getting a mortgage and purchasing a property.

  1. Help your child to save

Get your child to save for a deposit for their first property while staying at home, but also ensure they pay some board to get into the habit of paying bills. They should also control their spending, so that the banks can see their savings as being genuine towards a deposit.

This is cheaper than moving out and it will help achieve their deposit goal sooner.

  1. Assist with the deposit

This can be done as a loan or a gift. Either way, it will fast-track your child’s journey to becoming a first-home buyer

  1. Ensure they find work

This will demonstrate to the banks that they have income to cover their loan repayments.

  1. Offer your property as guarantee

Using your property as guarantee means you don’t have to dish out your own money. Nor will your whole house be on the line either because the guarantee is limited to a certain amount that is calculated according to the value of the new property. The loan will also remain in your child’s name.

Remember, that if your child defaults on their loan, then this puts the repayment responsibility on you as a guarantor. This can lead to strained relationships, so ensure you have a backup plan in case of any unforeseen circumstances, like your child losing their job.

Your guarantee can also be released after a few years, when your child’s property increases in value.

  1. Become a partner 

This will increase your child’s borrowing capacity, while also chipping in towards the deposit. You will also be building up your own wealth with an investment property.

The issue here is that you will also be responsible for your child’s repayments. So ensure they have the capacity to service their loan.

Remember to consult an expert to discuss your plans and goals before you sign on the dotted line.

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