3 Ways to Help Your Children Become Homeowners


 

These days, when young couples decide to stop renting and purchase their first home together, the first thing they find out is that it may not be as easy and quick as they might have expected. Only a quarter of a century ago, first-time homebuyers would have needed only a year’s savings for their first down payment whereas today, young couples could take over a decade!

Facing all these challenges and difficulties, many young couples seek some kind of support from their families, whether it’s their parents or grandparents. Fortunately, there are several ways in which they can help and here’s a short outline on how to do it. 

Provide the necessary cash

Providing your kids with the necessary cash is only a possibility for those parents that are well off and financially stable enough to buy their kids their first home, but even they would rather have their children be self-sufficient and financially independent so they can manage their responsibilities. This is why most parents go for the option of offering only a certain percentage of the necessary cash to help the children achieve their final goal of owning a home.

If you have this option as a parent, one thing you need to know and try to avoid is the stamp duty. Only the first-time buyers are exempt from this so if you join your kids in their mortgage application, they will have to pay this tax. In that case, a better option is to help your kids with monthly-based cash payments which are called “gift out of normal expenditure”. As such, it is exempt from inheritance tax and can be virtually unlimited.  

In some cases, senior parents see the solution in selling their home and moving to one of the great retirement villages in Sydney that provide excellent health care, wellness, and lifestyle choices, along with a dynamic social community. This is how the older generation can avoid risking their retirement comfort and security but still be in the position to assist their children with the finances left over from the sale of their family home.

Home mortgage alternatives

For those senior parents who own a large amount of equity in their home, there’s the option of taking out a mortgage and giving that money to their children for the purchase of their first home. The only restriction that exists here pertains to the parents’ age, especially if they’re over the age of 65, but there are also certain benefits only given to senior borrowers. It’s certainly a possibility worth investigating. 

Assisting without borrowing money

Finally, an option for those parents who are reluctant to get into debt but still want to help their children is doing exactly that but without borrowing any money. It can be done by taking out a guarantor mortgage where the parents’ income is considered in order to get more money in the end. In that case, you as parents guarantee to take on any unpaid monthly mortgage payments your children have missed. 

Another option is a joint mortgage that also provides your kids with the necessary money by having you as a parent become a partial, legal owner of the purchased property. Finally, the option of an offset mortgage is when the parent is offered a flexible payment which can be paid off either as a lump or in regular payments, or they can withdraw it later in case there’s a change in circumstances. 

Whichever option you decide on to help your children become homeowners will carry certain risks so it’s crucial you research all the available options carefully and choose the most affordable and beneficial one for all parties involved. 

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