Making the first step on the property ladder seems more and more daunting. For many young people just setting out, the idea of the great Australian property dream seems just that – a dream. There are initiatives to help first home buyers but even then a first purchase seems a long road to hoe. This is where many are heading to the bank of Mum and Dad.
Research in 2018 (Data Finance Analytics) placed the Bank of Mum and Dad as Australia’s 10th biggest lender. They also report that of first time property purchasers, 55% say they receive help from their parents with the finances. With the royal commission into banking resulting in the tightening of lending standards, this Mum and Dad Bank might attract even more customers.
Of course, not every parent has thousands of dollars sitting doing nothing just ready to be loaned to a child. Fortunately, there are other options which still makes supporting your children a reality. It is well documented that the current generation are living at home longer than previous generations and while this may be difficult to put up with at times (for both parents and children), the long term result of having minimal rent can be a great opportunity to put away enough for a deposit. A colleague of mine put all the money his son paid on board into a savings account and presented it back to him when he had enough to begin serious house hunting, giving him a greater initial deposit.
As well, most people with children old enough to be looking to buy property will have accrued considerable equity in their own home, and they can use this to assist their child’s purchase. This equity could be used as a lump sum contribution to a deposit, or in instalments to lessen regular payments.
Individual situations usually determine whether the money is gifted, loaned without interest or formally loaned with agreement to pay back with interest. Any way it operates, the Bank of Mum and Dad can be a great way to help your children realise their property dream.
Accrue Real Estate have been helping Melbournians buy property for years. They know the Melbourne market and have the expertise to assist you in all your property needs. Check out Accrue Real Estate South Melbourne on realestate.com.au