If you're looking to help your children secure a foothold in the property market, two primary strategies can assist: gifting them the deposit, or becoming a guarantor on their home loan.
If that’s a yes, you’re not alone.
It’s a legitimate concern.
While soaring property prices are welcome for those of us in the market already, you really have to worry as to whether our kids will ever be able to afford to get into the market on their own down the track.
Without help, the odds are looking firmly stacked against the younger generations from ever getting a foothold in the property market.
It’s a sentiment that’s been well documented.
I’ve had a couple of clients with young children of late who’re looking at ways (in the future) that they can help to ensure their kids aren’t going to be renting well into forties.
And if you’re on the road to your own financial independence, why wouldn’t you?
As a parent, it’s hard not to want to help your kids get a foot up in life, right!
There are two ways you can do it.
The first strategy is ‘gifting’ them, say, the deposit on a home.
In other words, you’re effectively giving them the money.
If you need to sell, say, an investment property to free up some capital, just be aware that you may be liable for tax, etc.
If, on the other hand, you don’t have access to capital, you’ll need a strategy to create enough wealth to be able to hand over that kind of sum down the track.
Whether that’s investing, saving or both, the key is to ensure you’re not impacting your lifestyle too much along the way.
Whichever way, the main benefit – aside from the joy of helping your children, obviously – is that, once you hand over the money, it’s effectively done and dusted.
The second strategy is going as a guarantor on your child’s home loan.
Here, you’re effectively putting up your own property assets as security.
The potential pitfalls are pretty obvious on this one.
You’re basically giving ownership of the property and title back to the banks – and you’re liable if you kids default on their home loan.
Potential risks notwithstanding, perhaps the biggest benefit of this one is that there’s no real negative impact to your lifestyle.
If you’re looking to help give your kids a foot up into the property market, we can help at Vista Financial Group. Book in a chat with our financial planning or mortgage broking team and we can discuss some options.
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