So your adult child wants to leave home and they may need your help. What do you do?

1. Research the First Home Buyer Grant and other government incentives
   Firstly they should consider assistance available from the government including the First Home Loan Deposit Scheme (FHLDS). Of course eligibility criteria is applicable, however they could enter the market with as little as 5% deposit and access to stamp duty concessions.
2. Keep saving darling
   You could tell them to keep saving, acknowledging that the price of property will continue to grow usually at a higher pace than their rate of savings, or they could settle for a much smaller place or location than originally desired.
3. You help them
   As Australian property prices have continued to grow, so too has parental help been of assistance to first home buyers. It is now estimated that the ‘bank of mum and dad’ is ranked as Australia’s tenth largest lender¹.

As parents, we will always want to help our kids, no matter what their age. Here are a few ways you can help, but before you do, make sure your own finances and retirement goals are in good shape.

And if you have more than one child, you need to consider whether you will need to provide similar assistance to other siblings.

How can you help?

There are pros and cons of each, so consider wisely.

Gifts

Providing a cash gift is a great step up, however it is not always going to guarantee their foot into the property market. A genuine savings pattern is also generally required to demonstrate an ability to service a loan. Consider that, by providing a ‘gift’, YOU relinquish your rights to reclaim the money in the future.

Loans

This is a more secure option for your own financial situation, even if you do not seek immediate repayment. This option could however limit the amount of money that your child could borrow as it will be considered as a financial obligation.

It is always recommended that your loan is legally documented to protect all parties involved, particularly in the event of a relationship break up between your child and their partner.

Co-ownership

We have seen parents purchase property with their children with the child buying them out at a later date. Initially the property represents an investment for you, however your child will not be able to claim the First Home Buyer Grant or other government incentives. Your share of the property will also be subject to capital gains tax when you sell your half to them.

Going guarantor

Over the past few years, we have seen a significant increase in parents becoming guarantors on the loan for their child(ren). Often this is the most suitable option for parents as it does not involve providing cash or lending money. Instead, you are providing equity in your own home as security for the child’s loan. It also does not hinder your child’s borrowing capacity.

It is always recommended that you seek legal advice before entering such an arrangement with your child(ren).

And for you?

Remember we are keen to help your kids jump into the property market as much as you are but we want to ensure everyone is well informed on the options and consequences if things were to go wrong.