Home-loan headstart

New way for parents to help first-time property buyers

THERE’S a new avenue for first-home buyers struggling to save a deposit to get into their own property sooner.

Parents can contribute up to 20 per cent towards the deposit for a new house through a “parent assist” loan through Homebuyers Centre and Resolve Finance, with the buyer stumping up whatever they can afford.

There’s no need for parents to be guarantors on the loan through this process, which involves a formally structured arrangement, according to the developer, and first-home buyers would still be entitled to the first-home owner grant and stamp duty concessions.

This allows struggling savers to sidestep lenders’ mortgage insurance, which is commonly stacked on to a home loan when a deposit of less than 20 per cent is involved.

It is also a formal loan from their parents, which attracts interest at half the rate of the home loan, rather than a gift or informal loan.

Resolve Finance general manager Sandy Paravizzini said parents could feel comfortable they were helping their children into a home via a formalised arrangement “without the need for them to provide a finance guarantee”.

Homebuyers Centre Victorian general manager Simon Mongan said the loan would give first-home buyers a head- start, which could allow them to build their “dream home”.

“Perhaps something that’s bigger or in a better location than what may have been in their price range without mum and dad,” he said.

Mortgage and finance specialist Lisa Montgomery said buyers needed to make sure they understood all of the terms and conditions.

“With any 100 per cent loan arrangement, it means the people or person doesn’t have to show a regular savings pat- tern, and there’s a reason why when you apply for a regular loan you have to do that,” she said. “It does show your ability to save and that reflects on your ability to repay.”

Ms Montgomery said borrowers should also ask themselves what would happen if the property went down in value. She added the structure was similar to a shared equity scheme because parents would receive the relevant percentage stake if the property was sold before being paid off.