A financial solutions company has said a significant proportion of its business recently has been helping millennials purchase property through family equity guarantor support or equity loans.
PAZE Financial said the generation is struggling to save a sufficient deposit to enter the property market and are increasingly relying on their parents or other family members to secure home finance.
The principal of the Sydney firm, John Valentine, said the bank of mum and dad has been a saviour for first-home buyers unable to save for a deposit while facing tougher lending criteria and high property prices.
He added, “First time buyers who have minimal savings or who face high price barriers to realise their dream of home ownership should know that they can get help from their parents or other family members to help secure a deposit for a mortgage.
“Under the family equity guarantor’s support policy or an equity loan on their home, parents or another immediate family member can help a first home buyer purchase a property.”
A family guarantee allows the bank to use some of the existing equity in a parent’s property to help out as extra “security” for the loan of their children.
Valentine said, “The guarantee is for a portion of your loan amount, not the whole amount.
“The advantage of a family guarantee is it reduces or avoids Lenders’ Mortgage Insurance and it enables you to maximise the amount you can borrow. Obtaining the family guarantee involves no extra costs.”
PAZE Financial recently helped Sohini and Jotish Agrawaal to help their daughters purchase land in Glenmore Park’s Mulgoa Rise estate in western Sydney.
Valentine said, “The Agrawaals were concerned their daughters Sherron, 24, and Shaniya, 22, would have to move interstate to be able to afford a home so we organised finance through equity in their home to help the girls each make a purchase of a 600 sqm block.”
Valentine said Sydney prices had reached a level where family support had often become necessary for first time buyers.
He added, “In the current lending environment, banks are also favouring these solutions where young people are not stretched beyond their means. Parents are also happy that they are able to give a helping hand to their children.”
