A 2018 report by Digital Finance Analytics has revealed that 55% of first home buyers are receiving financial assistance from their parents to enter the property market.
In the last quarter, over 23,000 first home buyers received assistance in the form of partial or completed deposits.
Mums and Dads, or the “Bank of Mum and Dad”, have made a contribution to an estimated 20 billion in total loan values for first home buyers. This is huge. So huge in fact that if the “Bank of Mum and Dad” was a real lender, they would be amongst the top 10 in the country.
First home buyers are feeling the pressures of rising house prices in Melbourne. The greatest issue, of course, is saving enough of a deposit to avoid paying costly LMI (lenders mortgage insurance). With the help of parents, many first home buyers are able to buy sooner, especially in growing areas such as Clyde, Wyndham Vale, Ballarat and Geelong, where House & Land packages are being purchased at very competitive prices. However, these prices and opportunities don’t last so first home buyers are looking to their parents to help them secure home loans sooner.
Many parents from the baby boomer generation (those born between 1946 – 1964), who make up the majority of the “Bank of Mum and Dad” have equity in their homes. Many say baby boomers are the biggest winners ever in the housing market in Australia. They were able to buy when prices were so much lower, and as a result, many have built up large sums of equity in their homes. Some parents are gifting amounts of this equity to their children or are helping them by signing a guarantor or family pledge loan.
The most popular ways mums and dads are assisting include:
- Gifted cash from savings
- Gifted equity from a home loan
- Gifted equity from an investment loan
For more information on how you can assist your children in their dreams of home ownership give us a call. We can help you identify options. Call 1300 652 842 or email firstname.lastname@example.org.