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.
Financial Gift
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.
Guarantor Loans
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.
Co-ownership
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.
Cash Loan
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.