27th Feb

Understanding the Implications Of A Guarantor Loan Before Asking Parents For Financial Support

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Explore the increasing trend of first-time homebuyers asking their parents for financial support. Plus steps to ensure that everyone involved is prepared and informed when considering a guarantor loan.

First-time homebuyers who turn to the "Bank of Mom and Dad" for assistance are increasing at an incredible rate, and this trend is not expected to stop anytime soon. Recent studies show that 60% of first-time homebuyers now ask their parents for financial support when making their first real estate purchase. These "Bank of Mom and Dad" contributions have totalled more than $34 billion, which has been used to finance first-time home purchases across the nation. Australian parents typically use guarantor loans (which let them borrow against their property's equity) or their own funds to contribute more than $89,000 towards their children's property dreams.

It is important to consider your parents' financial condition very carefully before asking for their help with a guarantor loan for your first home purchase; you don't want to risk putting them in a difficult financial situation themselves! Be sure you fully comprehend all the implications associated for both you and your parents before beginning the process.

Also, it's crucial to be honest with your parents about your own financial situation upfront. To establish how much money you will need from your parents, it is a good idea to create a budget that takes into account all of your income and expenses. This will allow your parent to gain a better knowledge of their contribution level and the risks involved on their part.

Before signing any loan or mortgage agreement, it is best to speak with a professional mortgage broker. A property is a big commitment that should not be rushed. An good mortgage broker can help you through the process and ensure everything is legal. They will also be uniquely positioned to offer priceless advise on what will work best for you and your parents.

Ultimately, although using a guarantor loan for your first home purchase might be a smart first step towards entering the real estate market, it's also crucial to be informed of all the ramifications - both favourable and unfavourable - before making that decision. You can ensure that everyone is happy with their choice with careful planning and sound financial counsel, allowing you to take pleasure in your first property without stress or anxiety.