There is no doubt that property ownership is becoming increasingly difficult to achieve for many young people looking to enter the market. More than ever parents are being relied on to help contribute towards a deposit. This is likely to remain a reality while housing prices remain at such high levels in Australia's major cities, but there are a few things you can do and discuss to ensure your kids have a better chance at being able to afford a property.
1. Don't underestimate the value of good credit
Your credit file shows your financial history over the last five years and any kind of loan you've applied for, this includes credit cars, home loans and things like after pay. Being aware of how some of your actions may affect your credit is crucial to building up good credit history. Things like missing credit card repayments, paying bills late or missing payments and applying for multiple loans are things that will not act favourable on your credit.
2. Don't forget about additional upfront costs
One of the most common mistakes first home buyers make, is forgetting to factor in additional costs when purchasing. The property's price tag is not the only thing that should be in your budget. Legal and conveyancing fees, as well as building inspections will be part of the costs in the lead up to purchase. One of the biggest forgotten costs is stamp duty, which can be tens of thousands of dollars depending on the property price. Though, most states have some kind of exemption for first home buyers. If you're deposit is less than 20% you may also need to pay Lenders Mortgage Insurance. Make sure you do your research or speak to a trusted broker to ensure you don't miss any costs.
3. You don't necessarily need a 20% deposit
While a 20% deposit will expand the choices you will have in securing a loan, you shouldn't cut yourself out of the picture just because you haven't saved that much. Speaking to a broker will be your best option if you haven't saved 20% yet, they can direct you to the best products for your specific situation which will result in you getting the best rate and terms possible.
4. Be mindful of spending and overall financial position
Lenders will take into account your overall financial position including income, assets and debts and liabilities. Its a good idea to hold off on getting a credit card or at least lowering the limits of cards before you apply. Furthermore, lenders look at living expenses and can still can one-off spends as a monthly expense. so its good to be mindful of what you spend before you apply so you know you can afford to repay.
Talking through these factors with your (probably adult) kid will give them the best possible chance of success when applying for loans.