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Helping your kids buy their first property - a checklist

Financial Planning  |  8/10/2018  |   8 min read

With the skyrocketing price of real estate in Australian capitals, the bank of mum and dad has helped many first home buys get into the market. But how can you help out the kids while also protecting your own future and assets? Here are five things you should keep in mind.

Decide what you can afford

Lending significant amounts of money can have various implications on your finances. You may be forgoing interest, you might not be able to repay other loans, or you may simply miss the safety net that comes with having cash on hand. Helping others is great, but make sure you can afford it, and are comfortable with the size of the loan.

Agree on the terms and conditions

Make sure everyone is clear about the nature of the loan and how it will be repaid.  Setting out clear payment terms  and dates helps ensure everyone knows their responsibilities and can be held accountable.

Ask the tough questions

Understanding your kid’s capacity to repay a loan is just as important as your ability to finance it. Make sure you understand their situation as far as income, expenses, and the value of the property before agreeing to anything. Just like a bank, you need to ensure they can afford the loan, and are able to repay it.

Get something on paper

It’s important to get something on paper when dealing with large sums of money. Whether that’s an email, a written statement, or a formal legal agreement is up to you, but having something you can refer to can help avoid disputes down the line.

Consider other family members

Lending money to one child can set a precedent that other siblings may also expect. And while you might be able to help one child with a home loan, are you in position to help the others? Managing the family’s expectations when it comes to loans can be just as important as the actual sums involved.

 

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This information is provided for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice. Issued by Equipsuper Pty Ltd ABN 64 006 964 049 AFSL 246383.  MySuper Authorisation Number 33813823017672 (‘Equip’, ‘the Fund’ and ‘the Equip Rio Tinto Fund’).

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