Opening the door to the property market
As young Australians look to enter the property market and consider their first home purchase; they research their options thoroughly to ensure they are taking advantage of the very best financial products and rates for first homebuyers.
With interest rates at an all time low, the financial services industry is experiencing a surge in home loans applications; with first home buyers eager to make their very first investment.
According to Beyond Bank Australia’s Relationship Support Manager, Leisa Neylon shared ownership products such as a Parent Equity Home Loan have become a popular alternative to standard home loans for first homebuyers who are struggling to save the deposit required for a house.
“The Parent Equity Home Loan product is designed so parents, in-laws or step-parents can help their children purchase their own home by using the equity in their property to guarantee the balance of the loan. It’s a great product as it offers protection for both sides, and limits the amount of exposure for parents,” said Ms Neylon.
Depending on how much a family member is willing to guarantee, the first homebuyer could borrow up to 100% of the purchase price as well as an additional 10% of the price to help with any additional costs of the purchase, like stamp duty or other fees.
Parents need to be willing to use the equity in their own home to guarantee a portion of the first home buyer load and are only held as guarantor until enough money has been paid off the loan or when the property value increases to reduce the loan amount to property valuation ratio below 80%. After that they are no longer tied to the Parent Equity Home Loan.
Choosing a Parent Equity Home Loan could also save first homebuyers money, as they may be able to avoid paying lenders mortgage insurance (LMI), which can amount to thousands of dollars. When the property increases in value or when the loan is sufficiently reduced, the guarantor can be released from the loan.
Parent Equity Home Loans are just one possible option for homebuyers but its’ not necessarily a one size fits all solution, so the best way to find out if this is an appropriate option for you is to visit your financial institution for more information.