With real estate prices skyrocketing out of control over the past few years, some of us are left wondering how our children will be able to afford a home of their own. Maybe they will be forced to rent for a long period or even move to an entirely new area in the outer suburbs. A growing number of parents are now assisting their children to enter the housing market by providing part of the equity in their property as security.

So what are the pros and cons of using your home as equity for your child’s investment?

Pros and Cons of using your home as equity

Allowing the use of your home as equity may enable the borrower to avoid Lenders Mortgage Insurance (LMI). If the loan exceeds 80% of the bank’s valuation of the property they are purchasing, the LMI can equate to a very hefty figure. As you may know, buying your first home can be incredibly stressful, so if you are not in a financial position to contribute funds, the use of your home as equity is a great way to help your children achieve their dream. However, your children will still need to have the capacity to repay the loan using their current income – and unfortunately, there’s no getting around this.

Although assisting them in this way may save time and money, there are also risks involved if the borrowers default on their loan. By using your property as equity you will be deemed a guarantor. It can be a risky move that could leave you in financial stress if your children run into financial difficulties down the track.

Getting started with property investment

Providing your children with equity through your own property is incredibly useful for their investment if you have confidence in their financial position.

If they wish to proceed, with your assistance, it is highly advisable to contact a reputable Mortgage Broker and here at APS Mortgage Broking, we have a friendly team with decades of experience that are able to assist you………..for FREE.

Do you have a reputable Mortgage Broker to find you the best solution?

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