With the increasing price of real estate in Adelaide, it is not unexpected that many parents are stepping up to support their grown-up children buy property. And, if you are contemplating the idea of helping your kids to buy their first home in Adelaide, here are a few ways that you, as a parent, can do that.
If you have the savings, you may want to provide your children with an early inheritance with the financial gift, which they can use as a deposit. While this may be a convenient option for families who have notable capital, it is essential you be mindful of your future medical needs and health and not leave yourself short of funds.
Agreeing to a guarantor loan is one of the most common ways parents can help their kids onto the property ladder. It is a mortgage product that enables parents to free up equity in their property to help their children with a deposit to purchase a first home in Adelaide.
The decision of becoming a guarantor should not be taken lightly. For instance, if your children default on repayments, the lender could look to you to repay the mortgage. In the worst-case scenario, if you put your own property up as security to act as a guarantor, you could end up losing your own house to repay your child’s debt.
Buying a property with your child implies you have a share of the property and will be listed on the property’s title. It is a safe way to protect your investment and have a part in the capital gain on the house when it is sold.
However, you need to sign a Property Sharing Agreement that defines who lives in the house, pays what and what happens when the house is finally sold.
Helping with a mortgage could kickstart your child’s first-home purchase journey. As with all loans, though, you must document the mortgage in a loan agreement, specifying whether you want your child to make monthly or weekly repayments and how much, decide on loan term, and whether you will impose interest – and if so, how much.
However, when you are still paying off your home loan, analyse the financial implications of taking a much bigger mortgage or dipping into your equity without having the income to cover the loan repayments.