Desperate FHBs with no deposit are taking out "parent assist" loans to get onto the property ladder; Lender BlueBay rolled out “parent assist” loans last year, allowing buyers to borrow 20% deposit from parents
Tweet Topic Started: 29 Jun 2015, 10:11 AM (5,301 Views)
DESPERATE and deposit-less first home borrowers are among those taking out two loans in order to get their foot onto the property ladder.
As the housing affordability crisis continues to worsen in Australia, aspiring entry-level buyers with little or no savings behind them are relying on their parents to stump up their deposit which they are formally agreeing to pay back — with interest — while also paying off a mortgage.
Parents are forgoing handouts and instead signing their kids up to even more debt by making them sign legal documents to repay back the money they stumped up to help them enter the real estate market.
Non-bank lender BlueBay rolled out “parent assist” loans last year, allowing entry-level buyers to borrow up to a 20 per cent deposit from their parents and take out a mortgage for the remaining balance.
Director Don Crellin said these types of loans were increasing in popularity and it was a way that would work out well for both the parents and the child.
The parent assist loans means the parents are not guarantors and are not gifting the money to the child as it must be repaid.
RAMS offers a loan that allows first-time buyers to borrow the full purchase price by using a parent or sibling as a guarantor — they use their own home as security so first-home buyers default the guarantor is held responsible.
But RAMS head of product Nathan McMullen said customers who do take on these loans need to fit “strict criteria.”
“Arrears rates are significantly lower on these loans than for comparable loans without a family guarantee,’’ he said.
St George Bank also provides a family pledge loan which allows parents to use their own home’s equity to provide additional security for a portion of the child’s loan amount.
Most banks have "family guarantee" style products and have had for years. Pretty good products really, it allows a borrower with less than 20% deposit to avoid the cost of LMI and they can also bring forward their purchase to save time, which is of value in a rising market..
Any expressed market opinion is my own and is not to be taken as financial advice
It amazes me the creativity and the ingenuity of people when going about buying their first property, but then shelter is very high on one's list of needs so perhaps it isn't so surprising.
I don't think the full gamut of ideas has been exhausted yet.
What will they think of next?
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
It amazes me the creativity and the ingenuity of people when going about buying their first property, but then shelter is very high on one's list of needs so perhaps it isn't so surprising.
I don't think the full gamut of ideas has been exhausted yet.
What will they think of next?
Maybe they could loan you money, and you pay a certain amount as in kind , borrower with benefits.
Right up your alley!
WHAT WOULD EDDIE DO? MAAAATE! Share a cot with Milton?
Most banks have "family guarantee" style products and have had for years. Pretty good products really, it allows a borrower with less than 20% deposit to avoid the cost of LMI and they can also bring forward their purchase to save time, which is of value in a rising market..
Cars have been around for years. The fact that there are ten times more cars on the road now then there was 50 years ago shouldn’t concern you.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
Cars have been around for years. The fact that there are ten times more cars on the road now then there was 50 years ago shouldn’t concern you.
Straw man Veritas
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
You're right, it doesn't concern me in the slightest, in fact I think that it's a good thing.
It’s a good thing that more and more new entrants to the market, unable to raise the deposit necessary to buy, are having their loans underwritten by their parents? Do you see this as a good thing because it keeps customers coming through your doors?
skamy
29 Jun 2015, 01:15 PM
Straw man Veritas
Not a straw man. You are just too thick to understand the point being made.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
It amazes me the creativity and the ingenuity of people when going about buying their first property, but then shelter is very high on one's list of needs so perhaps it isn't so surprising.
I don't think the full gamut of ideas has been exhausted yet.
What will they think of next?
They will count the income of your children as they enter the workforce and remain at home.
Stuff me, I think it is time to start using the correct language.
Nothing that requires a loan to be taken, is 'affordable'....
It amazes me the creativity and the ingenuity of people when going about buying their first property, but then shelter is very high on one's list of needs so perhaps it isn't so surprising.
I don't think the full gamut of ideas has been exhausted yet.
What will they think of next?
Inter generational mortgages.
that's what's next.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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