No matter how old your children are – as a parent, you may feel it’s important to help them out financially. And getting onto the property ladder can be a big part of it.
Here are three steps you can take to set your kids on the path to homeownership.
Gifting. Often parents who are in the financial position to do so will gift their child(ren) a sum of money to help them into their first home.
One of the benefits of gifting is that because it is a gift, and therefore not repayable, repayments for this amount of money are not factored into the affordability of the borrower. This means that your children have a head start with not only a deposit, but also affordability calculations for their loan repayments.
However, a lender may also want to see some evidence of savings on the part of the borrower. Talk to RESIMAC Direct about whether gifting is a good option for your family situation, and whether an additional savings history is required.
Loan. If you have several children to help out, you may not have the capacity or ability to provide a non-repayable gift, or a guarantee for each of them. Even if you do, you may still not want to 'give away' all your hard-earned equity and cash with retirement just around the corner.
Providing a repayable loan to your kids can help both you and them. The benefit of a loan for you is that you get back that equity and cash, in regular repayments – which can help your cash flow in retirement.
Many people find themselves 'asset rich but cash poor' in retirement, so using the equity in your home as a loan may give you cash just when you need it. The benefit for your kids of course is that they can buy their home sooner than they could have without your help.
Buying a house together. Buying a house together means you have the benefit of all income sources factored together to demonstrate affordability. However, you also need to factor in all the living costs.
Buying a house together may help both parents and kids get into the property market, and the house could be lived in by all parties (if the layout suits), or by only one of the parties. Whatever the situation, it is important to put an agreement in place so that everyone is crystal clear about the details and expectations.
No matter how you choose to help out your kids, always ensure that you seek legal advice and have any agreements drawn up by a legal expert. If you are interested in helping your children into their first home, we welcome you to give the team at RESIMAC Direct call today.
Please note: The information in this article is of a general nature only, and is not intended to be personalised financial advice. We recommend you talk to a financial adviser before making any financial decisions. Investing in property has risks as well as benefits, and the value of your property and returns, are subject to market fluctuations.
See if you qualify. To get a more accurate idea of how much you can borrow with RESIMAC Direct, click here