How to help your kids buy a house
Parents are stepping in to bridge the housing affordability crisis in growing numbers. Here’s how to make it work.
As house prices soar into unchartered territory, record numbers of parents are choosing to help their adult children with that first step onto the property ladder.
The decision to help financially comes as the pandemic-fuelled property boom pushes home ownership further and further out of reach of young buyers – many whom suffered job losses at the height of Covid-19 restrictions last year.
Parents are stumping up around $90,000 per adult child on average – an increase of more than 20 per cent in the past 12 months, according to analysis by researcher Digital Finance Analytics. It’s enough for a deposit in many postcodes beyond Melbourne and Sydney.
The Bank of Mum and Dad is estimated to have loans of about $35 billion, making it the nation’s ninth-largest mortgage lender. How parents are handling these loans with their adult children vary greatly.
Australian personal finance authority Noel Whittaker helped his three children get onto the property ladder. “We’ve always believed that it’s better to help your children earlier, rather than later. But saying that, you’re better off giving your adult children a hand up, rather than a hand-out,” he says.
One way to do this is to incentivise them to save. For example, you could offer to gift your child $10 for every $10 they save towards a deposit for a house. “If they’re hopeless with money, this could teach them an important lesson,” he says.
But it’s important to also safeguard your own financial wellbeing in the process, Mr Whittaker warns.
There’s no easy answer on how to help your child get into property, he says. “Where it becomes tricky is if there are martial break-ups, which are not uncommon these days.”
Also, you can’t always treat each child equally. Factors that come into play include whether or not they run a business, if they’ve demonstrated good savings habits in the past, what they do for work, if they have a family and your own relationship with them, he says.
Here’s how to help adult kids get onto the property ladder.