Of course, but it’s the rate of change that matters.
If there has been a significant increase in the number of borrowers raiding the bank of mum and dad it tells us that something has changed.
Principally, it tells us that there has been a corresponding increase in the number of households who would, more than likely, not have secured a loan without doing so.
Is that not noteworthy in anyway?
It is in rufies world, it's all spin spin spin.
It's like saying I'm 50 and I've always smoked and I'm fine. It ignores any possibility that you are headed for irreparable damage, potentially something terminal and basing it in on nothing other than past performance.
Bank of mum and dad is useful its nothing new for some people .
As long as its not abused which it does in some instances can happen to the parents financial detriment . If they have established equity(especially if its more than the average their age) it can help their offspring in getting a head start.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$ It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do. Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
Of course, but it’s the rate of change that matters.
If there has been a significant increase in the number of borrowers raiding the bank of mum and dad it tells us that something has changed.
Principally, it tells us that there has been a corresponding increase in the number of households who would, more than likely, not have secured a loan without doing so.
Is that not noteworthy in anyway?
I was referring to investors buying more properties, not family assist loans.
Generally for loans with family assistance they don't put money in, they guarantee up to 20% of the house price which has two effects, it becomes the deposit, and it means the borrowers (the children) don't have to pay mortgage insurance because the whole loan is within the required lending margins. Often the kids have a decent deposit anyway, but not enough to cover 20% plus the stamp duty, so it's more of a way of saving the mortgage insurance that would otherwise have cost them.
Mortgage Insurance is costly. For example on a 95% loan to buy a house for $800,000 the cost will be:-
Deposit 5% $40,000 Stamp Duty $46,289 (including allowance of $1500 for solicitors fees) LMI $38,131
Total $124,420
So while we refer to that as a 95% loan in fact the buyers have had to stump up 15.56% of the purchase price. The above stamp duty cost is for Victoria, but other states are similar.
BTW I'm not defending the above costs, just mentioning what they are. If parents can save their children $38,131 of the above costs then that's a big saving for the kids, especially if you add interest on $38,131 over 20 or 30 years on top of it. Even for a 95% loan to buy for $400,000 the costs are:-
The reason I calculated the fees as if they are not FTB's is because it's not uncommon for one of a couple to have come from a previous relationship and been a part owner of a house and so are unable to claim the stamp duty concession - just saying)
A parent assisting in a $400K purchase would still save their children $13,855 which can be put to better use with a smaller loan or cost of furniture etc. Parents have a natural desire to help their children, nothing is going to alter that from here until eternity. I know it makes it a bit harder for those whose parents are not able to assist, but that's the way it is.
Banks still want the buyers to show good savings, have a good income that services the loan without support from parents, and meet all the normal loan criteria they normally expect. If a borrower who was a crap risk had parents to assist with a parental guarantee, he/she wouldn't get the loan on the strength of the parents alone, the borrowers still need to be able to service the loan in their own right. the guarantors are almost always security guarantors, not servicing guarantors. There is a difference between the two. Parents could opt to be servicing guarantors as well, but I've not seen that happen.
I was referring to investors buying more properties, not family assist loans.
Generally for loans with family assistance they don't put money in, they guarantee up to 20% of the house price which has two effects, it becomes the deposit, and it means the borrowers (the children) don't have to pay mortgage insurance because the whole loan is within the required lending margins. Often the kids have a decent deposit anyway, but not enough to cover 20% plus the stamp duty, so it's more of a way of saving the mortgage insurance that would otherwise have cost them.
Mortgage Insurance is costly. For example on a 95% loan to buy a house for $800,000 the cost will be:-
Deposit 5% $40,000 Stamp Duty $46,289 (including allowance of $1500 for solicitors fees) LMI $38,131
Total $124,420
So while we refer to that as a 95% loan in fact the buyers have had to stump up 15.56% of the purchase price. The above stamp duty cost is for Victoria, but other states are similar.
BTW I'm not defending the above costs, just mentioning what they are. If parents can save their children $38,131 of the above costs then that's a big saving for the kids, especially if you add interest on $38,131 over 20 or 30 years on top of it. Even for a 95% loan to buy for $400,000 the costs are:-
The reason I calculated the fees as if they are not FTB's is because it's not uncommon for one of a couple to have come from a previous relationship and been a part owner of a house and so are unable to claim the stamp duty concession - just saying)
A parent assisting in a $400K purchase would still save their children $13,855 which can be put to better use with a smaller loan or cost of furniture etc. Parents have a natural desire to help their children, nothing is going to alter that from here until eternity. I know it makes it a bit harder for those whose parents are not able to assist, but that's the way it is.
Banks still want the buyers to show good savings, have a good income that services the loan without support from parents, and meet all the normal loan criteria they normally expect. If a borrower who was a crap risk had parents to assist with a parental guarantee, he/she wouldn't get the loan on the strength of the parents alone, the borrowers still need to be able to service the loan in their own right. the guarantors are almost always security guarantors, not servicing guarantors. There is a difference between the two. Parents could opt to be servicing guarantors as well, but I've not seen that happen.
If they can save it, then they can pay the nice man more
I was referring to investors buying more properties, not family assist loans.
Generally for loans with family assistance they don't put money in, they guarantee up to 20% of the house price which has two effects, it becomes the deposit, and it means the borrowers (the children) don't have to pay mortgage insurance because the whole loan is within the required lending margins. Often the kids have a decent deposit anyway, but not enough to cover 20% plus the stamp duty, so it's more of a way of saving the mortgage insurance that would otherwise have cost them.
Mortgage Insurance is costly. For example on a 95% loan to buy a house for $800,000 the cost will be:-
Deposit 5% $40,000 Stamp Duty $46,289 (including allowance of $1500 for solicitors fees) LMI $38,131
Total $124,420
So while we refer to that as a 95% loan in fact the buyers have had to stump up 15.56% of the purchase price. The above stamp duty cost is for Victoria, but other states are similar.
BTW I'm not defending the above costs, just mentioning what they are. If parents can save their children $38,131 of the above costs then that's a big saving for the kids, especially if you add interest on $38,131 over 20 or 30 years on top of it. Even for a 95% loan to buy for $400,000 the costs are:-
The reason I calculated the fees as if they are not FTB's is because it's not uncommon for one of a couple to have come from a previous relationship and been a part owner of a house and so are unable to claim the stamp duty concession - just saying)
A parent assisting in a $400K purchase would still save their children $13,855 which can be put to better use with a smaller loan or cost of furniture etc. Parents have a natural desire to help their children, nothing is going to alter that from here until eternity. I know it makes it a bit harder for those whose parents are not able to assist, but that's the way it is.
Banks still want the buyers to show good savings, have a good income that services the loan without support from parents, and meet all the normal loan criteria they normally expect. If a borrower who was a crap risk had parents to assist with a parental guarantee, he/she wouldn't get the loan on the strength of the parents alone, the borrowers still need to be able to service the loan in their own right. the guarantors are almost always security guarantors, not servicing guarantors. There is a difference between the two. Parents could opt to be servicing guarantors as well, but I've not seen that happen.
Okay, but:
Quote:
The increasingly generous parental assistance has turned the “bank of mum and dad” into the nation’s fifth largest lender behind the big four banks, according to financial comparison site Mozo.com.au. NSW parents contributed almost $33 billion to help their children buy their first property, accounting for roughly half the $65.3 billion property aid parents gave to their children nationally. The most common way parents helped was allowing their children to live rent free in their home and contributing money toward a deposit. Others acted as guarantor on loans, helped with repayments or bought as a partner with their children.
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
The increasingly generous parental assistance has turned the “bank of mum and dad” into the nation’s fifth largest lender behind the big four banks, according to financial comparison site Mozo.com.au. NSW parents contributed almost $33 billion to help their children buy their first property, accounting for roughly half the $65.3 billion property aid parents gave to their children nationally. The most common way parents helped was allowing their children to live rent free in their home and contributing money toward a deposit. Others acted as guarantor on loans, helped with repayments or bought as a partner with their children.
Your linked quote specifically says - The most common way parents helped was allowing their children to live rent free in their home and contributing money toward a deposit
We have previously covered this in another thread. People are spending more years in educating themselves and delaying forming households, so they stay at home longer. Most parents have fairly generous natures and don't charge their children commercial rents, in most cases parents are subsidising their children's living costs.
Take risks - if you win you will become wealthy, if you lose you will become wise
Bank of mum and dad is useful its nothing new for some people .
As long as its not abused which it does in some instances can happen to the parents financial detriment . If they have established equity(especially if its more than the average their age) it can help their offspring in getting a head start.
You have drunk from that poison challis so you are hardly independent
Your linked quote specifically says - The most common way parents helped was allowing their children to live rent free in their home and contributing money toward a deposit
We have previously covered this in another thread. People are spending more years in educating themselves and delaying forming households, so they stay at home longer. Most parents have fairly generous natures and don't charge their children commercial rents, in most cases parents are subsidising their children's living costs.
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