How to help your children up the property ladder
For anyone trying to buy a home in today's market, recent conditions aren't particularly accommodating. According to the Housing Industry Association's Affordability Report, the affordability index dropped by 6.4 per cent over the December quarter. This has pushed the rating to 75.6 (a score of 100 represents a balanced market). A mix of incredible price growth and a supply shortage has helped see to this.
In these circumstances, young first home buyers could find it tough to break into several city's markets, and are often being priced out of their own region. If your kids are struggling to get a foot on the property ladder, there are a few ways you can lend a hand.
Let's take a look at how you can do this:
Putting a deposit
CoreLogic's monthly indices show that the average value of houses across Australia's five biggest cities was $757,330 by the end of January. In Sydney, Australia's densest city, this figure was a whopping $993,770. Clearly, buying real estate in Australia is more costly an affair than its ever been, making it a journey just to save for the initial down payment.
If you want to invest into the future of your children, why not give them a one-off cash gift that will go toward a deposit. Not only are you speeding up the saving process for them but keeping them motivated and with their eyes on the prize.
Put your home as collateral
For those picking up a home loan for the first time, lending conditions aren't usually in their favour from the get-go. With no property of their own to put as collateral should things go south, they present a greater risk toward lenders.
If your child is in this situation, it can help immensely to put yourself forward as a guarantor. This means that you'll put your own home down as collateral for the mortgage, which can help lower the minimum deposit that they have to commit by quite a bit. It could help them to buy a home and get a foothold in the market much quicker, as well as keep them motivated.
The great thing is that it won't cost you a cent, but can fast-track your child's property journey significantly. However, there are obviously big risks to this. Just make sure they have the income and financial stability to make those repayments or you could, in the worst-case scenario, lose your home. Speak with a financial adviser to see if such an approach is right for you and your young adult.