My daughter wants to purchase her first home. She can afford the repayments but is struggling to save a deposit whilst she is paying rent.
We own our home but don’t have the cash to give her. Is there any way we can help her get into the market?
NO DEPOSIT HOME LOANS
There are a few lenders who will allow you to borrow 100% of the purchase price (or valuation – whichever is the lower) meaning that the borrowers need no deposit. Some providers will even lend the fees (stamp duty etc) associated with a purchase.
FAMILY EQUITY LOANS
You may use part of your house as security to help your daughter buy a home without a deposit.
An example of this would be where your daughter wishes to buy a home for $300,000. Lenders would normally allow her to borrow $240,000 (80% of the value without lender’s mortgage insurance) leaving her $60,000 (plus stamp duty and legal costs) short.
If your house is worth $450,000 and you own it outright, the lender will take security against your house to cover the shortfall. This allows your daughter to borrow the full amount needed to enter the market.
GIFTING THE FUNDS
Another way is to borrow enough funds yourself against your home and gift it to your daughter. This is now possible even if you are retired with a reverse mortgage.
As with most things there are pros and cons with each option. Please contact the office for further information regarding your individual circumstances and obligations. We will be able to work out the most appropriate option for you.
