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Gen Y bank on parents to buy first home - young people desperate to get on property ladder; Parents increasingly helping kids to buy a house
Topic Started: 10 Sep 2011, 08:20 PM (710 Views)
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Young people are banking on the family home to get a foot on the property ladder

By Wes Hosking
September 10, 2011 12:00AM

YOUNG battlers are resorting to unconventional ways to break into the housing market.

A growing number of parents are using their own homes as security so their children don't have to stump up a deposit.

Others are buying with friends and family, renting out a room or buying an investment property to make a start.

Aussie Carnegie mortgage broker Mark Daly said family equity loans, which can allow applicants to borrow the entire value of a home and avoid costly mortgage insurance, were becoming more popular with younger cash-strapped buyers.

Many had used their savings on flashy cars and big-screen TVs but weren't willing to compromise on location or lifestyle for a home.

"They want everything now and suddenly discover they've got no cash," he said.

"The reason these options are popular is because people don't have the savings.

"They have either spent it or the house they want is so expensive they need a bigger deposit."

Aussie, Commonwealth Bank and ANZ were among lenders offering such deals, which many buyers were unaware existed.

Mortgage Choice spokeswoman Kristy Sheppard said about 1-2 per cent of first home buyers used a family equity loan. "Lenders became very risk averse when the GFC hit and in the couple of years following," she said. "It's only this year we've really seen them becoming less strict with their lending criteria."

But she warned parents' properties could be at risk if such deals went pear-shaped and it was crucial home buyers understood the discipline of saving.

Read more: http://www.news.com.au/money/property/young-bank-on-family-home-for-loan-security/story-e6frfmd0-1226133621971
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Parents increasingly helping kids to buy a house

October 27, 2014
Chris Tolhurst

More Australian parents than ever are stumping up large sums of money or providing "family pledge" loans to help their adult children buy property, mortgage brokers and real estate experts say.

Financial strategist and mortgage broker Mario Borg told Domain "there is definitely more of this going on."

He said many parents were offering a portion of the homes they owned outright and which had increased in value by up to 25 per cent in the past two years, as pledge loan security to support their children's home loan applications. Others were buying property in a joint venture with a child.

"I also see many parents provide a cash gift to their kids," said Mr Borg, who runs a training business for mortgage brokers.

He said real estate prices in the major capitals had increased since 2012 but official numbers for first home buyers gaining housing finance approvals had fallen.

He noted that many family-assisted first-home purchases were not being counted in the first home buyer, or FHB, data collected by the Australian Bureau of Statistics.

"If I bought a property jointly with my son, that wouldn't involve a first home buyer loan, so you wouldn't know about it," Mr Borg said.

The widening access younger Australians have to the bank of mum and dad, coupled with the introduction of more restricted first home buyer grants, appears to be hiding the true extent of FHB purchasing.

Domain Group senior economist Andrew Wilson said the eastern seaboard states now only offered FHB grants for the purchase of new properties.

Established properties no longer qualified for the grants. He said this had made it more difficult for the ABS to identify buyers who were purchasing established property for the first time.

Dr Wilson said baby boomers (born between 1945 and 1964) had a cultural connection to home ownership.

"They have reaped the highest rewards from the booms of the past three decades," he said. "There is an enthusiasm to help out, particularly now that you don't get the first home buyer grant unless you are buying a new property."

Dr Wilson said some first-time purchasers in Sydney and Melbourne were buying $600,000 properties. If they borrowed $480,000, lenders required them to be earning about $2000 a week.

"I can't see the typical first home buyer having $150,000 in cash and earning $2000-plus a week," he said.

Paul Nugent, of Wakelin Property Advisory, agrees it has become much more common for parents to partner with adult children to buy property or to lend or give them money.

"Over the past three years, you have seen more fathers bidding at auction on behalf of adult children," he said.

In a statement on housing finance last week, the ABS asked lenders to report all loans to first home buyers.

"Concerns have been raised that under-reporting could occur if some lenders were only able to accurately report on those buyers receiving a first home buyer grant," the statistics body said.

Read more: http://smh.domain.com.au/real-estate-news/parents-increasingly-helping-kids-to-buy-a-house-20141026-119tdx.html
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