Bank of Mum and Dad step forward during Covid

The less restrictive lockdown measures on the Surf Coast have meant property sales have continued to flow, and increasingly parents are stepping in to help.

It’s no secret that property prices on the Surf Coast are likely to surge over the coming years, with more Melbournians and ex-pats looking to set up home-office in Regional areas. With rental property scarcity also on the rise, locals have been catapulted into action to try and secure their own piece of property sooner rather than later.  And their parents don’t blame them.

Where parents are willing and able to help out, the cleanest and often easiest way is via a “non-refundable gift”. Non-refundable means it is not a loan. If it is a loan, it needs to be treated as a liability that the “kids” must “service”. (We say kids lightly as some of these kids are in their 50s, of course!). To qualify, parents must provide a signed letter or Stat Dec confirming the situation, and funds need to be provided to the borrower ahead of settlement.

Provided good savings habits are already evident, it need not be a lot. As little as $10.000 can be enough to fast track the process, and help buyers reduce or avoid Lenders Mortgage Insurance, which can cost thousands.

The alternative option is a Family Guarantee.  In this case, parents must use an existing property (generally one that is mortgage free) as security. It’s not a decision to be taken lightly though, as it effectively means their home or investment property has a mortgage over it, until such time as the total loan is paid down to 80% of the kids’ property value, at which point the parents’ property can be released.

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For more tips & advice, contact Lanie Conquest or Nicola Tucker at Surf Coast Finance

With over 25 years’ banking & financial services experience, she helps local families & businesses make smart financing decisions.

M: 0418 938 646

E: [email protected]

W: surfcoastfinance.com.au