Most parents would love to help their kids into a place of their own. Not only does it start them on a path to independence and financial stability, it can also encourage them to finally leave the nest.
However, with house prices staying high and large upfront costs required from most lenders, making the move into home ownership can seem like an impossible dream for many young first home buyers.
So, what can we parents do to help our children overcome these hurdles and help achieve the great Aussie dream?
Think twice before you go guarantor
Many parents are tempted to ‘go guarantor’ for their children, which essentially means using a portion of your home as security for your child’s home loan. It can seem like a convenient way to avoid them having to pay thousands in up-front costs, but it comes with substantial risk.
If your child defaults on their home loan, it could be your house that’s on the line. And what happens if your second or third child also wants a helping hand?
Set up a savings plan
To help your children face the reality of meeting fortnightly loan repayments, why not charge them board at around the same level as what they’d repay on an average unit for a set amount of time?
When that time is up, the money they’ve paid could be put toward their start up costs for a home loan. That way, they’ve learned what it’s like to make regular loan repayments, and how to save for a set goal.
Encourage debt-free living
Credit cards, store-cards and personal loans can all reduce how much your child can borrow. It pays to teach them to use credit responsibly, and always pay their bills on time. An unpaid mobile bill today could mean a declined loan application in the future.
Help research the best start
The reality is, even with the best parental encouragement, not everyone can afford to save for a deposit on a traditional home loan. However, there are alternatives you can explore with your kids. HomeStart offers low deposit
options and lower upfront costs, which can help that dream of owning a home ‘one day’, start today.