These days, young Australians can barely afford to dream of purchasing their own home or becoming a property investor. Lately, the rate of home ownership in young people has dramatically decreased.
Moreover, statistics reveal that one-third of Australians do not own a property. In most cases, young people are seeking the help of their parents when they want to buy a house. How can parents help their kids to break into the property market?
Use your home equity as a deposit for your children’s investment
If you haven’t accessed your home equity yet, you may be surprised to find out how valuable this can be. Buying a property requires a lot of financial effort, and in most cases it’s next to impossible for the young of today to save up enough of a deposit to buy a home. Giving them access to your equity allows a purchases to proceed as the equity takes the place of the deposit required to close a purchase.
Buy the house yourself
In some cases, parents decide to purchase the house by themselves, and then the children pay it back gradually through a peer to peer arrangement. In other situations, parents choose to rent it to their children through a rent to buy scheme which allows them eventually to own their own home.
Become a joint borrower and own a part of the property
If you can’t afford a great financial commitment, you can invest in your child’s house by becoming a joint borrower on the loan and owning a part of the property. It’s usually common for parents to become owners of one-half of the property. However, the main disadvantage of this option is that you will have to take the entire financial responsibility if your kid isn't able to meet his or her repayments.
Guarantee for your kids’ loans
If you cannot provide your child enough money for a deposit or help him or her in another way to break into the property market, you can use your home as a guarantee for his or her house loan. However, you should not hurry to do this, because this option can be quite risky. The bank or the lender can have access to your primary residence, which is your home if your children are not able to keep up with their repayments.
Offer your kids valuable pieces of advice and support
Sometimes, parents cannot help their children financially when it comes to such an important investment, or they prefer not to. However, you can always help your kids with the necessary support and education when it comes to the property market. Make sure your child fully understands what this market is and what a home loan implies and teach them budgeting skills from a young age.