Author: Ryan Morgan-Jones

How “The bank of mum and dad” can help you get on the property ladder

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If your childhood was anything like mine, you’ve probably heard your parents refer to themselves jokingly as the ‘bank of mum and dad’. This probably would have happened when you overstepped the mark and asked for extra pocket money.

All jokes aside, today first home buyers find themselves facing a property market with an ever increasing entry price, and more and more of us are reaching out to our folks in the hope of purchasing our first place.

If you’re struggling to save the deposit (and other costs) for your first home, here’s how some parents are helping their kids get a leg up and get into the game.

Going guarantor

A guarantor loan means that if saving your whole deposit is proving tough, you can secure your own home loan and buy a place by using your parents’ property or assets as security. As you repay your loan, your parents’ security is released. Greater Bank’s Family Pledge Loan is great for first home buyers, as it lets you borrow up to 110% of the value of your property, meaning you may be able to avoid paying lenders’ mortgage insurance, which can run in the tens of thousands of dollars.

Lending or gifting a deposit

If your deposit is proving hard to save for, it may be possible for your parents to lend or gift you the remainder of your deposit to secure your loan. This is more common than you’d think, and has both pros and cons. Anytime you’re mixing family with money can prove volatile and a little nerve-wracking, but on the plus side, your mum and dad will (hopefully) chose not to charge you interest on this loan.

Teaming up

More and more, we’re seeing first time buyers combine assets with their parents, and buy a property together. Parents have partial control over the mortgage, and the property can be considered an investment by both parents and child. If you’re independent, you may want to avoid this option, but if you’re open to the prospect, be sure you and your folks plan how repayments and maintenance will be managed, and what the exit plan will be should one party want to sell.

Staying put

An ever growing trend we’re also noticing is that first home buyers are choosing not to move out of the family home, or in some cases, move back home so they can focus on saving for their deposit. Often these arrangements involve children paying a small amount of board in lieu of the rent they’d otherwise be paying, but in some cases they live at home for free (lucky!). Some first time buyers are even choosing to continue living at home while purchasing an investment property, with a view to selling for a profit and securing their owner-occupied deposit.


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