Here’s the keys to your first home… now get out!
Parents struggling with their still at home 20 or 30-something “children” are helping drive a rise in first home buyer sales. New ABS stats show a jump in First Home Owner grants in Queensland, with 5400 handouts in the three months to June 2012, compared to 4000 during the same period last year. And a large number of these buyers are getting a hand from Mum and Dad.
Direct Deal Finance’s Mark Goedecke says there’s a number of options for parents wanting to support family in their first real estate purchase.
“Some lending institutions have what’s called a Family Pledge. This enables family members with equity in their own property to help their children with additional security, thereby allowing their child to borrow up to the full cost of the home. It’s aimed at both home buyers and investors who have the ability to repay the loan but lack sufficient funds to meet both the required deposit and the associated costs.”
Mark says the parents don’t need to see it as a long term commitment. “At a later stage, when sufficient equity and repayments have been made, the child may be able to redraw on the loan or re-finance to repay the parent. Some lending institutions allow the guarantor to nominate the specific amount to which the guarantee is limited, rather than a traditional open guarantee for the entire amount.”
Rising rents and lower interest rates have created the momentum for many tenants to take the plunge into home ownership. With the $7000 First Home Grant and zero stamp duty for a home under $500,000 there’s sound government incentives as well. Commentators say the broader real estate market often takes its lead from first home sales, these purchases allowing upgraders to make their move and the flow-on effect to take hold.
And then there’s the parents who free themselves up for that smaller apartment with less bedrooms!