Gold Coast parents are trying to help their kids get on the property ladder and are risking their own homes to do it.
New figures released by the Mortgage and Finance Association of Australia show parental guarantee loans, where the borrower uses the equity in their parents’ home as security for their mortgage, are making up one in every six loans written by many brokers.
Mortgage Choice Burleigh Heads broker James Hasselle heeded caution.
“Parents need to consider if they are going to downsize in the future because they will take the guarantee with them,” he said.
“Something I hear a lot is that family relationships crumble and it is wise to get a family law solicitor because sometimes the process can become conflict driven.”
REIQ Gold Coast zone chairman John Newlands said he had seen a huge increase in first-home buyers asking for their parents’ help.
“Leaning on parents to top up short falls is becoming increasingly popular and it enables someone to get in to the market,” Mr Newlands said.
“Some of the banks now accommodate for parental guarantors. It is an effective way to get in because it offers the first-home buyer security.”
MFAA director Melissa Gielnik said housing affordability was “not improving” for entry-level buyers. “Parental guarantee loans represent over 15 per cent of loans written for some brokers,’’ she said.
“A lot of people getting these loans do have savings but their parents are helping them break into the market and avoid mortgage insurance.”
Lenders mortgage insurance is payable if the borrower has less than a 20 per cent deposit and it can costs thousands of dollars.
However, there are still cheap options for first-home buyers on the Gold Coast.
Leda Group is offering 60sq m units in Pimpama from $325,000. They feature two bedrooms and two bathrooms.
“We just sold six homes in the first week to first-home buyers,” Leda Group’s Richard Duce said.
“I am seeing a lot of people using the First Home Buyers grant, borrowing the balance and paying it off.
“It is a wiser way to getting into the market compared to splashing out on rent.”
Original article published at www.goldcoastbulletin.com.au by Hannah Sbeghen 18/6/16