How families can help home buyers

Saving to buy a property is not easy and these days it’s harder than ever, due to a lack of affordable options in many capital cities. If you have a family member who is currently saving to buy, you’ll know how stressful and drawn out that process can be. There are however ways that you can help them to reach their target quicker.

Monetary gift

If someone in the family is in the position to do so, a monetary gift can be a big help. Instead of buying presents for their birthday or other celebrations, you could suggest contributing to a ‘house deposit fund’.

If they have been slogging away to build up their deposit, every little bit helps and any contribution can keep them on track and motivated. While this may seem like an impersonal gift, it’s likely they need money a lot more than they do more ‘stuff’.

Gift registry

If the potential home buyer is getting married some time soon, you could also talk with them about whether they’d prefer setting up a savings fund rather than a gift registry. Getting all of the wedding guests onboard with this wish would make a big impact and could help to raise a tidy sum towards their housing deposit.

But be aware that even if a family member receives their deposit as a gift, they’ll still need to show the bank they’re reliable payers before they’ll be granted a loan. Waiting periods apply for deposits obtained as cash gifts and your family member will need to keep the money in the bank for 3 to 6 months without spending any to show they are capable of servicing a loan.

Family trust

If you have a family trust, you could discuss the options available when it comes to buying a new home. Depending on the ownership structure of the trust, you could all get together and decide how much money will be allocated and any terms associated with it. A financial advisor can also help the family with this process.

Guarantor

A guarantor can be your parents, parents-in-law, step-parents, grandparents or siblings. They must own a certain amount of their own property (their equity) which effectively becomes your deposit.

If it turns out you can’t make your payments, the guarantors will have to find the equity they guaranteed and pay it to your lender. If they used their family home, they could be forced to sell. So, asking someone to go guarantor is a big deal.

If it works out though, you get into the property market without putting up any cash and everyone is happy.

Non-monetary help

If you can’t afford to give your children their deposit and don’t have enough equity in your own home to go guarantor for them, one way you could help them in a non-financial capacity would be to allow them to live at home for longer, either rent free or for a nominal charge so that they can pour all of their wages into their home loan savings.

Want to learn more?

To find out more about helping someone buy their first home, see us online at Loan Market. You can also compare home loans from major  lenders, find a mortgage broker or use our home loan calculators, so visit us online or get a Loan Market broker working for you by calling 13 56 26.