There are more and more headlines in the media supporting the view that first home buyers are finding it difficult to break into the housing market.
As a result, more and more parents are providing financial assistance (via loans or guarantees) to their children. Whilst this is an admirable thing for parents to do, just about everyone knows the danger of lending money to family. Sadly, we see the ugly results fairly regularly.
We also see the nervous look in a parent’s eyes when they put their own home on the line to guarantee their children’s debts.
The only thing riskier than lending to family is lending to complete strangers. However, the banks do this thousands of times every day.
The banks worked out how to protect themselves from this risk centuries ago. They place a mortgage on the borrower’s title.
If only parents could do the same as the banks. If only parents could place a mortgage on the children’s home to secure their risk.
Well, now they CAN.
A very innovative bank has now developed a home loan where the parents can also place a mortgage on the children’s property as long as it is a free standing house.
The children end up with two home loans. One from the bank (up to 90% of house value) and the other from the parents (minimum 10% of the value).
The bank manages the repayments, security and paperwork for the parent’s loan. The children make repayments to both loans.
The more we look at this product the better it appears.
The following 3 minute video shows you how this product works.
Whilst some parents may have been very reluctant to provide financial assistance in the past, they should feel far more comfortable knowing they have security over the children’s property.
This is a great new product.
Michael Daniels, B.Com
Smartline Personal Mortgage Advisers
State Manager NSW & ACT
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.