Many of us are starting to think about implementing our New Year resolutions and aspirations, for some, this will include purchasing their first home.
The homeownership dream can seem near impossible for many young people, particularly with rising house prices. The median price in Australia has increased from $300,000 to $530,000 in the past 10 years. In turn, this also means we now need a higher deposit to secure a mortgage.
Research shows that more than 45 per cent of first homebuyers intend to buy a house with a partner, however most tend to rent before they’re ready to buy and are faced with the rising costs of living, making it more difficult to reach a suitable deposit.
We understand the difficulty facing first home buyers , and now offers alternative options to help break into the property market, in the form of a Parent Equity Home Loan.
This option allows first home buyers to take out a home loan with little or no deposit by engaging their parents, parent-in-law or stepparents, as a guarantor.
Parents need to be willing to use the equity in their own home to guarantee a portion of the first home buyer loan. Parents are only held as guarantor until enough money has been paid off the loan or when the property value increases. After that they are no long tied to the loan.
There are also options to borrow an extra amount to help with costs associated with the purchase.
Depending on the guarantor amount provided by the parents, thousands of dollars in mortgage insurance costs can also be avoided.
A Parent Equity Home Loan can offer a variety of benefits, but you need to seek advice and understand how to best mitigate against some of the associated risks, including ensuring you can meet repayments and having a backup plan in case your financial situation changes unexpectedly.
Parent Equity Home Loans are just one possible option but it’s 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 talk to us! Leave a comment below if you have any queries.
^Robert Keogh, Chief Executive Officer