Treading Carefully: Essential Tips for Borrowing from the Bank of Mum and Dad

The phenomenal growth of first-time property buyers seeking help from the 'Bank of Mum and Dad' shows no signs of slowing down. According to recent research, 60% of first-home buyers now turn to their parents for financial assistance when purchasing their first property. In total, these 'Bank Of Mum and Dad' contributions account for $34 billion put towards first-time home purchases across the country. Australian parents have contributed an average of more than $89,000 to their children's property goals, often through guarantor loans (allowing you to borrow against their property equity) or using their personal savings. Those considering asking for mum and dad's assistance through a guarantor loan for their first property purchase must consider their parents’ financial situation very carefully - don’t risk putting them in a precarious position! Before starting the process, make sure you have a thorough understanding of all the risks involved for you and your parents. It’s also important to have an open and honest discussion with your parents about what you can realistically afford. A good starting point is to make a budget that takes into account all of your income and expenses, so that you can determine the amount of money you will need from your parents. This will also help give them an understanding of how much they are contributing and where their money is going. Finally, it’s worth consulting with an expert before committing to any loan or mortgage agreement - remember this is a long-term commitment and one that should not be taken lightly! An experienced professional can provide invaluable advice on what would work best for both you and your parents and guide you through the process to ensure everything is above board. At the end of the day, taking out a guarantor loan for your first home purchase can be an invaluable stepping stone to joining the property market, but it’s important to be aware of all the implications - both positive and negative - before you take that leap. With thoughtful planning and appropriate financial advice, you can make sure that everyone involved is comfortable with their decision, enabling you to enjoy your first property without worry or strain.