As property prices continue to skyrocket, more and more first home buyers are needing to call on their family to help them enter the property market. Mortgage Choice’s annual First Home Buyer Survey showed that 4.9% of all first home buyers used the property of an immediate family member or parent as a Security Guarantee when purchasing their first property.
Mortgage Choice Woolloomooloo customers Sarah Hopkins and her husband have done just that, and were featured in an article in the Sydney Morning Herald about helping their children onto the property ladder.
Despite Sarah’s Son and Daughter-In-Law both working full time, and receiving some money from family in England, they still couldn’t afford to secure a mortgage to buy an apartment in the Northern Beaches of Sydney.
CoreLogic Data shows that in the last financial year, property prices across combined capital cities raised an average of 8.3%, with Sydney and Melbourne leading the way.
With property prices still increasing it’s no wonder many first home buyers are finding it difficult to get into the property market without financial assistance from a guarantor.
Sarah and her husband have opted for limited exposure on their Son’s home loan. Once $60,000 is paid off the mortgage they will be removed as guarantors from the loan.
Sarah believes that if parents have done well from rising property prices, they should help their children if it’s within their means. “I think that we have to do it because we’re in a situation where our property’s value has risen, and they are finding it difficult to get into the market.” Sarah says.
Loan Consultant Matt Spooner says that guarantors can help first home buyers save thousands of dollars when purchasing property.
“By having a family member act as guarantor, borrowers can jump into the property ladder sooner, and avoid paying Lender’s Mortgage Insurance as well” he said.
“As long as the first home buyer can comfortably make the regular mortgage repayments, there is very little risk associated with this type of financial assistance. I expect to see an increase in the amount of first home buyers using guarantors to purchase property.”
“Once the first home buyers build equity in their loan, the guarantors can ask to be released from the loan” he said. “Just like Sarah and her husband have done, once $60,000 has been paid from their Son’s mortgage, they won’t be guarantors anymore.”
For further information on buying your first home, or to arrange an interview with one of our loan consultants give us a call on 02 9358 4855 or complete the contact us form to request a time that suits you!
You can read the full Sydney Morning Herald article here.
*Photo of Sarah Hopkins courtesy of Wolter Peeters