Is it possible that this year may be the year you assist your kid in purchasing their first home?
First-time homebuyers are finding it more difficult than ever to put together the funds necessary to finance their first purchase. As a consequence, many people are asking to borrow from their parents’ savings accounts. Here’s all you need to know about assisting your kid in purchasing a home in 2022…
A record number of first-time buyers are turning to the “bank of mum and dad” this year to help them get on the housing ladder — even older children who have long ago fled the bird’s nest.
When it comes to helping their children, one of the most common ways is to boost their child’s credit rating by serving as a guarantor or by providing a deposit. This will assist them in obtaining a more favourable mortgage rate. There are several differences between these options and presenting a financial gift of money (which could have a tax implication.)
If parents want to offer to deposit a lump sum of money with a mortgage lender as a type of financial guarantee, the funds will have the least amount of tax repercussions since they are only being used as collateral. The situation is the same if parents offer their own property as security.
In case you’re eager to assist your youngsters but are not sure where to begin, here are some ideas to consider:
Guarantor mortgages
A guarantor mortgage is one in which a parent or close family member assumes responsibility for the mortgage obligation. This implies that if the buyer fails to make their mortgage payments, the guarantor will be obligated to make up the difference.
Family offset mortgages
With family offset mortgages, parents or grandparents deposit their money into an account that is connected to the mortgage of their kid. In order to make the child’s mortgage payments more affordable, the money in the savings account is then deducted from the mortgage.
Family deposit mortgage
As part of a family deposit mortgage arrangement, a family member puts funds into a specific savings account, which is subsequently kept as collateral against the mortgage.
Flexible family mortgages
A parent or other family member may be able to utilise a portion of the value of their own property as collateral. It is also possible for a family member to put money aside in an offset account, which decreases the amount of the mortgage on which interest is paid.
Gifted deposits
The parent makes a down payment on their child’s house in order for them to buy it.
Shared ownership
In this instance, both the parent and the child’s names will appear on the mortgage and the title to the property. The size of the loan will be determined by the wages or assets of both the parent and the kid. If one of them fails to make payments, the other will be held accountable for the debt.
One of the most effective methods of finding the best mortgage for you is to seek assistance from a mortgage broker. They will act on their client’s behalf and work as a liaison between them and the mortgage lending institution.
A mortgage broker may provide guidance on how to improve one’s credit score so that it is more appealing to lenders, particularly for first-time buyers or those with a bad credit history. Often, it comes down to knowing who to contact for the correct loan.
If you would like some suggestions for mortgage brokers in your area, or if you would like some advice on how you may be able to assist your children in obtaining a home, please contact us and we would be happy to provide you with our experienced guidance.
If you do not keep up with your mortgage payments, you run the danger of losing your home. It is therefore critical that you make an educated decision. It is possible that your house may be repossessed if you do not make timely mortgage payments.
***All information was current at the time of publication. Depending on the mortgage lender, several of the mortgages described above may be referred to by a variety of names.
