Let’s Talk Real Estate
with Anne Haynes Belle Property Berwick
HOW PARENTS CAN HELP THEIR YOUNG ADULT CHILDREN ENTER THE REAL ESTATE MARKET
Buying a home is an exciting and often daunting milestone in a young adults life. For many, it is the first significant investment they will make, and the process can be challenging, especially for those with limited financial experience. Parents can play a vital role in helping their children navigate the complex world of real estate and ensure they make a sound investment.START EARLY AND PLAN AHEAD
Parents can help their children by discussing their goals for homeownership and offering clear understanding of the steps involved in the process and the associated costs and monthly repayments. My tip on this one. Pay your mortgage weekly. You can take four to five years of the mortgage simply by doing this.
Parents can work with their children to establish a savings plan. Open a bank account with both the parent and child’s name on the account. Set up a deal with the bank that withdrawing funds can only occur with adult signing off on it. To provide incentive to the child’s saving, when the child deposits into the account, parent deposits same amount. Children are encouraged as they see their balance increasing at a faster rate. From experience, you can set up such an account with Westpac Berwick. I’m sure other branches offer this as
well. Be mindful parents, you may have to pay a bit of tax once the savings reach a substantial amount.
PROVIDE FINANCIAL ADVICE
Parents can provide a monetary gift or offer the option of having their
child move back home (if they left home) rent-free to help them save.
GOING GUARANTOR
Most larger banks and lenders offer guarantor on home loans for parents (close relatives). A guarantor means parents don’t have to give their kids money. Instead, they can use the equity built up in their home as a security for part or all of the deposit. Both parties are listed on the title, parents (guarantors) are liable to settle outstanding debt if the children struggle to make payments – which may mean your own home could be at stake. Also ensure that insurances are up-to-date particularly in flood zones, bushfires and/or anywhere.
JOINT OWNERSHIP
Using this arrangement you may decide to divide ownership of the property in whichever way you like such as 60:40 or 50:50. Whatever you decide any arrangements should be properly documented, which may include drawing up a formal rental agreement for the person occupying the property. Some considerations to be mindful of; if someone’s circumstances change and they want to exit the agreement, or if one party can no longer meet loan requirements the other party becomes liable not just for their share but the full loan repayment. Your future borrowing capacity may be reduced and where the property is not your main place of residence you could result in capital gains tax liabilities upon its sale.
Whether considering using any of the options outlined. Please consider; Can I afford it now and in the future? What are the tax and
pension implications? How will it affect my other children? What are
my expectations? Have I sought professional advice?
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Belle Property Berwick – 2/16 Langmore Lane, Berwick Anne Haynes 0417 007 350 | anne.haynes@belleproperty.com or visit belleproperty.com/berwick
The information provided in this article is for educational and informational purposes only. It is not intended to be a substitute for professional legal and financial advice, and it should not be relied upon as such. Any action you take based on this article is at your own risk. The author will not assume any liability or responsibility for any errors or omissions in the content of this article or for any actions taken by you in reliance on this information provided in this article.