Three-fifths of Australian parents would consider gifting or lending money to their children to help them buy a house, a new survey has found.
The research from Mortgage Choice has also shown that more than half (53 per cent) of respondents would become a guarantor on a home loan for their child.
A further 45 per cent said they would consider using the equity in their home to help fund their child’s first home purchase.
Mortgage Choice application data had also shown that 6.14 per cent of first home buyer home applications used a guarantor in 2020.
Susan Mitchell, chief executive of Mortgage Choice commented that in a housing market with substantial price growth, it’s “perfectly understandable” that parents are looking for ways to help their kids enter the property market.
“The average dwelling price in Australia’s capital cities, in particular Sydney and Melbourne, are prohibitive which means those looking to buy their first home will need all the help they can get,” Ms Mitchell said.
She added that being a guarantor on a loan could eliminate or reduce the amount needed for the deposit, allowing people to enter the market sooner.
“Instead, the guarantor uses the equity in their home as additional security against the child’s loan. This can also help reduce the Loan to Value Ratio to reduce or remove the costs of LMI,” Ms Mitchell commented.
But the process is not “straightforward”, she warned.
Legal firm Barry.Nilsson. recently warned that there are various risks associated with parents assisting their children in entering the housing market.
Will Stidston, principal of the firm, cautioned parents that in the event their children separate from their partner, a “significant portion” of their money may be lost to the child’s spouse.
Find out more about the top property and home buying trends in your local area at the Better Business Summit 2021. Places are limited so make sure you secure your place at the five-state event asap!
[Related: Broking industry reaction to the budget]