How parents can help their children enter the property market: A comprehensive guide.

In today’s competitive property market, buying a home can feel like an impossible dream for many young Australians. Rising property prices and stricter lending conditions are making it harder for first-time buyers to break into the market.

If you're a parent looking for ways to support your children on their journey to homeownership, this guide will walk you through various options—both financial and non-financial—to make the process easier.

Book a call with us today to discuss personalised strategies to help your children in achieving their dream of homeownership.

Financial Support Options

There are several financial strategies you can use to help your children buy their first home. Here’s an overview of each option, including how they work and their respective pros and cons.

1. Gifted deposit

One of the simplest ways to support your child is by providing a gifted deposit. This involves giving your child a sum of money—usually enough to help them reach the deposit amount required by their lender.

How it works

A gifted deposit is just that: a gift. You provide the money without any expectation of repayment. Lenders usually require a letter confirming the money is a gift and not a loan.

Pros:

• Easy to execute and immediate.
• Your child doesn’t have to worry about repaying you, freeing them to focus on their mortgage.

Cons:

• It could affect your own savings or retirement plans.
• Some lenders still require proof of genuine savings, so a gifted deposit alone might not suffice.

2. Family pledge loan (Guarantor loan)

A family pledge loan, also known as a guarantor loan, allows parents to use the equity in their home as security for their child’s home loan. This helps the child avoid needing a large deposit and can also bypass the need for lenders mortgage insurance (LMI).

How it works

As a guarantor, you pledge part of your own property’s equity—typically 20%—to act as additional security for your child's loan. This reduces the lender's risk and enables your child to borrow more or avoid LMI.

Pros:

• Helps your child secure a home loan with little or no deposit.
• Saves them thousands on LMI.

Cons:

• Your own property is at risk if your child defaults.
• It may affect your ability to refinance or borrow more on your own mortgage until the guarantee is released.

3. Co-Buying

With co-buying, both you and your child purchase the property together, sharing ownership and the financial responsibilities of the mortgage.

How it works

When co-buying, both of your names will be on the mortgage and the property title. The lender will assess both of your incomes and assets, increasing the loan amount you can potentially borrow together.

Pros:

• A combined income can help your child buy a home that they otherwise couldn’t afford on their own.
• Both parties build equity in the property over time.

Cons:

• If one party wants to sell while the other doesn’t, it can lead to complications.
• You’ll share financial responsibility, meaning if your child misses repayments, you’ll need to cover the shortfall.

4. Loaning money

If gifting a deposit isn’t possible, you might consider loaning money to your child. This can be structured as an interest-free or low-interest loan but should be formalised to avoid misunderstandings.

How it works

You’ll draw up a loan agreement that outlines repayment terms, interest rates (if any), and what happens in case of default. It’s advisable to seek legal advice when drafting this agreement to ensure clarity for both parties.

Pros:

• You provide financial support without giving away your savings permanently.
• You can set your own repayment terms.

Cons:

• Personal loans between family members can create tension if repayment terms aren’t met.
• If your child can’t repay, it could strain your relationship and finances.

5. Covering additional costs

Buying a home isn’t just about the deposit—there are additional costs like stamp duty, legal fees, and moving expenses. As a parent, you can contribute by covering some or all of these costs.

How it works

Rather than helping with the deposit, you can pay for the additional one-off expenses associated with buying a home. This can ease the financial burden on your child, allowing them to focus on securing a mortgage.

Pros:

• It relieves some immediate financial pressure.
• It’s a one-time contribution that doesn’t tie you to the mortgage.

Cons:

• While helpful, it’s a one-off contribution that doesn’t lower their long-term mortgage commitments.

Non-Financial Support Options

Financial support isn’t the only way to help your children buy their first home. Here are some non-financial strategies that can be equally valuable.

1. Housing your child while they save

One of the most practical non-financial ways to help is by allowing your child to live at home, either rent-free or at a reduced rent, so they can save more quickly for their deposit.

How it works

By cutting down on their living expenses, your child can focus on saving for a home deposit. This arrangement can speed up their savings timeline significantly.

Pros:

• Directly helps your child save faster without involving financial risk.
• No impact on your own finances.

Cons:

• The arrangement can last longer than anticipated, which may affect family dynamics.
• It may not work for every family situation.

2. Providing guidance and advice

Sometimes the most valuable help is guidance. Sharing your experience and knowledge about property buying, loans, and financial planning can give your child the confidence they need to make smart decisions.

How it works

From helping with budgeting to reviewing property contracts, your knowledge can help your child navigate the complexities of buying a home.

Pros:

• You offer support without any financial commitment.
• Your experience can help them avoid costly mistakes.

Cons:

• They may not always take your advice, which can be frustrating.
• Even with your advice, your child may still face challenges beyond your control.

3. Encouraging the First Home Super Saver Scheme (FHSSS)

The First Home Super Saver Scheme (FHSSS) is a government initiative that allows first-home buyers to save for a deposit through their superannuation, providing tax benefits.

How it works

Your child can make voluntary contributions to their super, which are taxed at a lower rate than their income. When they’re ready to buy, they can withdraw these contributions to use as part of their deposit.

Pros:

• It’s a tax-effective way for your child to save for a deposit.
• Encourages long-term financial planning and discipline.

Cons:

• The funds can only be withdrawn for a home purchase, limiting flexibility.
• It might take time to build a significant amount through this scheme.

There are numerous ways parents can help their children enter the property market, from providing financial assistance to offering valuable advice and support. The key is to choose the option that best suits both your situation and your child’s needs.

Whether you decide to gift a deposit, act as a guarantor, or simply help them budget and save, your support can make a huge difference in helping your child achieve the dream of homeownership.

Looking for more tips?

If you want to explore these options further, or need professional advice tailored to your specific situation, contact us today at 1300 780 440 or book a 10-minute chat today. We're here to help!