How can you help your kids with their mortgage?

As Australian property values increase, many first home buyers are turning to “The Bank of Mum and Dad” for help with purchasing their first property. Whether you have adult children on the brink of moving out, or have a young brood who won’t be buying property for another couple of decades, it’s understandable that you’d want to help them out.

Here are a few suggestions (that don’t necessarily involve buying property for each of your children!)Educating your children about good saving strategies from an early age will help them build up the funds for their first property.

Instil sensible saving habits 

One of the very best things you can do for your kids is to educate them. Smart saving starts in early childhood and ingraining habits such as putting away a small amount of money each week will ensure your children think about the future as they grow older, and hopefully will encourage them to build up the funds for their first property.

This strategy is also clever if you’re not too keen on financing your children’s homes yourself. Equip them with the tools to save up themselves, and you can relax into retirement!

Act as guarantor

Another option is to act as a guarantor for your child’s mortgage, which means your own property’s equity serves as security for their home loan. The mortgage remains in your child’s name and should they default on the loan, the bank would take their property first. As a guarantor you will be liable for any shortfall after the sale proceeds of the borrower’s property has been used to reduce the loan.

This is a way of eliminating the need for your child to pay mortgage lenders insurance, and increases their borrowing capacity.You can also give your adult kids a cash gift or take out a home loan together to help them get onto the property ladder.

Commit your cash

Of course, you can also contribute to your child’s home loan in part or full. You could become a co-borrower and jointly take out the home loan with your child, lend them the mortgage deposit, or buy the property outright for them.

This is a massive financial commitment, so it’s important you discuss these options in depth with your children before taking any concrete steps.

It’s also advisable that you chat to a mortgage adviser about these different options before deciding, as they can help you choose the right course of action for your family – no matter how far away your kids are from owning their own homes.