Recent Home Living Property Culture The Team North Shore Living
Recent Home Living Property Culture The Team North Shore Living
Property

Helping your child own a home in Sydney

22-Jan-2020
Written by Matthew Bourn
Buying your own home is a huge step in someone's life. It marks a huge financial investment, an end to paying rent to someone else and also means you have a sense of independence.

However, the housing market, especially on Sydney’s North Shore, might be more difficult to get into than ever before. If you have children who are struggling to get their foot on the property ladder, what can you do to help?

Is it really harder to buy a home these days?

Millennials and other younger generations often complain that the housing market is harder than ever to get into, but is it really?

In most cases, it certainly seems to be. Based on the simple ratio of average house price to average income, Business Insider says that the average ratio has gone up from 4.5:1 20 years ago to 7:1 now, while Domain says that it may be as high as 14:1 now.

On top of that, the median house price has grown far higher than the median wage at that time.

Another factor is that lenders are asking for bigger deposits than before and, in Sydney, it's taking homeowners an average of 11 years to save for their deposit.

Teach children good savings habits

Real estate mogul Tim Gurner infamously told millennials that the secret to saving up for a deposit was to stop buying avocado on toast. While the nuance of his message got lost in outrage, Tim's message could be more appropriately summed by saying that people need to be smarter with their money.

Teaching children good saving habits from an early age can give them benefits throughout life. There are many different ways to do this, but some common strategies include:
- setting aside money for needs, wants and savings (and sometimes for giving away)
- stating goals for savings
- letting children make their own (small) mistakes
- having discussions about money
- setting a good example

Talk to them about all aspects of finance

As your children get older, it's a good idea to start talking about the various aspects of finance, from bank accounts and credit cards to the process of getting a mortgage.

Knowing how all aspects of finances are linked -- payslips, bank statements and credit history all tie into mortgage applications, for example -- is a good grounding.

With any kind of debt -- from short-term things like credit cards to long-term home loans -- it's important that they know about interest rates, repayment terms, overall repayments and the effect on their credit ratings.

Offer to be guarantor

One huge way you can help your children get a mortgage is to act as guarantor for them.
The benefits of doing this can be immense. It makes a lender more likely to offer a loan, it means your child can own a house sooner (and stop paying rent to someone else) and means they might be able to avoid paying Lenders Mortgage Insurance.

There are risks associated with being guarantor as you may have to pay back the loan, or at least some of it. Despite this, you won't own the property or have any investment in it -- you're doing it purely for the gratitude of the homeowners.

To minimise your risk, some lenders allow a loan to be broken into multiple smaller loans. That way you can act as guarantor on a smaller part of the loan, reducing your risk but also still being of great value.

Talk to us about North Shore property sales

If you have a property and need advice on selling, feel free to give us a call.

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