YOUTH BUY­ING HOMES

Highfields' Own - - Real Estate -

THE pop­u­lar­ity of par­ents go­ing guar­an­tor on their chil­dren’s loan has risen sig­nif­i­cantly in re­cent years, new re­search has re­vealed.

Ac­cord­ing to Mort­gage Choice’s an­nual First Home Buyer Sur­vey, 4.9 per cent of all first home buy­ers had a par­ent or im­me­di­ate fam­ily mem­ber go guar­an­tor on their home loan.

“This is up from 3.9% in 2015 and 3.8% in 2014,” Mort­gage Choice chief ex­ec­u­tive of­fi­cer John Flavell said.

“This slight jump in de­mand for home loan guar­an­tors is un­sur­pris­ing when you con­sider that prop­erty prices have risen fairly sub­stan­tially across most prop­erty mar­kets over the past few years.”

Data from Core­l­ogic found prop­erty prices across the com­bined cap­i­tal cities rose 8.3% over the last fi­nan­cial year, with Syd­ney and Mel­bourne the stand-out per­form­ers.

“Given that prop­erty prices con­tinue to rise month af­ter month, it is lit­tle won­der why so many first home buy­ers are find­ing it dif­fi­cult to put a foot on the prop­erty lad­der with­out some form of fi­nan­cial sup­port,” Mr Flavell said.

“By hav­ing a fam­ily mem­ber go guar­an­tor on a home loan, first home buy­ers are not only able to get their foot on the prop­erty lad­der sooner rather than later, but they can also po­ten­tially avoid pay­ing Lenders Mort­gage In­sur­ance.”

To­day, many lenders al­low a fam­ily mem­ber to go guar­an­tor on a home loan.

They sim­ply use the eq­uity in their prop­erty as ad­di­tional se­cu­rity for the bor­rower’s loan.

While the pri­mary se­cu­rity for the bor­rower’s home loan is the prop­erty they pur­chase, the lender also takes a mort­gage over the guar­an­tor’s prop­erty.

This mort­gage does not sup­port the loan di­rectly, but is used to sup­port the guar­an­tor’s fi­nan­cial guar­an­tee.

Mr Flavell said guar­an­tors ef­fec­tively help bor­row­ers — es­pe­cially first time buy­ers — save thou­sands of dol­lars.

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