Many young couples have the capacity to make the mortgage repayments on a home loan but they can’t afford to save up for the home deposit. This is where parents who are financially secure can help their children get onto the property ladder. Here are some of the things they can do:
Gift the deposit
The most common and straightforward option to help your children buy their first home is to give them the deposit money as a gift. In the current mortgage market, this will likely be 10 to 20 per cent of the value of the property. If you can afford the entire deposit that can be a good start.
A good amount for the deposit will help your child reduce the amount he/she needs to borrow and the interest over the period of the loan.
Buying house jointly with parents
There are two ways you can buy the property together.
- Joint tenancy. This means each one of you owns the property equally, and if one joint tenant dies, the surviving one automatically gets the share.
- Tenants in common. This means both of you own a share/portion of the property, and if one dies the share is passed on according to the chosen beneficiary.
Buying together will likely be a great option for both of you. It can be a 50/50 arrangement, or you could take care of the deposit while you child takes the responsibility with the repayments and maintenance, or whatever arrangements that the both of you will agree upon. Don’t forget to put your agreements into writing.
Let them live at home
It’s very difficult to save up for the deposit, especially when you’re still renting. Letting your child live with you at home is a simple way to help them save up. Even if you ask them to contribute financially while their under your roof, this could still benefit them in saving for the deposit money.
Apart from the financial assistance, there are other ways you can help your child, such as teaching them about the importance of saving and budgeting. You can also educate them about how interest rates work, the costs involved in purchasing a house and the government assistance they can get.