The kids want to buy a property – but can ‘never’ get a big enough deposit. And, as property prices outstrip the kids’ savings, buying their own property is looking harder-and-harder than ever before (despite the fact interest rates have been at the lowest on record).
Thankfully there is way of turning the tables; where the kids can tap into the equity Mums and Dads have built in their home as prices have risen over the past few years.
Family Equity loans are first home buyers’ springboard onto the property market.
In many cases the banks that do Family Equity loans will lend borrowers up to 105 per cent of the price of the property being purchased – this means that the kids can even borrow things like stamp duty and not have to pay Lenders Mortgage Insurance.
The way that the banks structure these loans is that they lend 80 per cent of the purchase price secured against the new property, while the remaining 25 per cent is secured against Mum and Dads.
If the kids could afford the repayments, they could even take out such a loan without any savings behind them.
But both loans are in the kids name – which means that Mum and Dad don’t actually have to out their hands in their pocket.
Not all banks offer Family Equity loans and each one structures them differently. If you need help arranging Family Equity loans, please contact your Chan & Naylor Finance Broker.