As the heat goes out of Melbourne’s housing property market and new government policies have been introduced to support first home ownership now is a great time to look at helping your children or grandchildren to achieve their dream of owning their own home.
The topic of buying a home attracts a lot of talk about housing prices and affordability in Melbourne. First home ownership is getting more and more difficult for young home buyers so parents are looking for ways to help and governments continue to introduce policy changes that help first home buyers without skewing property values.
One option is to refinance and free up equity in your home to help your child. There are some finer details to be aware of when taking this approach so call our refinance experts at Hunter Lending Group today.
We’ve outlined below some ways you can help the first home buyer in your family.
Give a cash gift that helps cover the deposit
Not all of us can afford to do this for our children but if you can this is the most straight-forward way to help your children or grandchildren buy their first home. Note that lenders will want to see this amount sitting in the applicant’s (your child’s) bank account for at least three months, in some cases six months, before they’ll recognise it as a legitimate deposit. Lenders will also want to see a steady income and evidence of capacity to service the remainder of the mortgage.
Use your home as security to guarantor your child’s mortgage
This approach means you don’t have to hand over any cash and your children won’t have to spend years trying to outrun rising property prices as they save for a deposit. However, your child will still need to demonstrate that they can service the loan repayments and lenders vary in how much equity they like to see before granting mortgages using this method. We also recommend having a very honest and brutal conversation about what happens in case of default – consider a back-up plan if your child defaults or loses his/her income and consider the possibility that you may need to go the private rental market to find tenants who can pay rent to service the loan.
Changes to the first-home buyer duty concession means that contracts entered from July 1, 2017 are exempt from paying stamp duty on homes with a value of less than $600,000. Homes with a dutiable value of $600,001 to $750,000 will be entitled to a concessional rate of duty based on a sliding scale.
From July 1, 2018 first-home buyers will be able to use up to $30,000 of voluntary superannuation contributions to place a deposit on a house or an apartment to help young people gain a foothold in the property market. This completes a loop of using your money wisely – contribute extra to your super fund and access relevant tax breaks (penalty-free) then use that money to buy your property.