Greetings Future Homeowners! It’s Graham Turnbull, your financial strategist and mortgage broker at GT Financial Services. Today, let’s delve into a common query from our first home buyer clients – How can you leverage your parent’s property to make your dream home a reality?
Why Consider Your Parent’s Property?
So, you’ve set your eyes on your dream home, but the numbers aren’t aligning with your savings? Don’t worry; you’re not alone. Let’s say your dream property costs $500,000, and you need $30,000 for the deposit, stamp duty, and other fees. If your savings fall short, and your parents are willing to help but can’t provide the cash, leveraging their property can be the solution.
Two Approaches, One Clear Choice
Now, there are two ways to go about this, and I’m here to guide you through the options. The first method involves cross-collateralisation, where the bank uses both your property and your parents’ property as security. However, I strongly advise against this route. It adds complexity and risks, potentially impacting both properties.
The second, simpler, and less risky approach is for your parents to release equity from their property and gift you the cash. This way, you can use the funds as a deposit for your home, and the two properties remain separate. This method offers numerous advantages, including protecting your parents’ property in case of any legal issues that might arise.
How Does It Work?
- Release Equity: Your parents can work with their lender to release equity from their property. Equity is the difference between the property’s value and any outstanding mortgage.
- Gifted Cash: Once the equity is released, your parents can gift you the cash. This is a significant advantage, as it doesn’t create any debt or obligation for you.
- Deposit for Your Property: You can then use the gifted cash as a deposit for your first home, helping you secure the property without the need for a substantial upfront payment.
Benefits of Keeping Properties Separate
- Legal Protection: By keeping the properties separate, you safeguard your parents’ property from any potential legal issues related to your home.
- Financial Flexibility: The gifted cash acts as a clean and straightforward transaction, giving you flexibility in managing your finances and reducing potential complications.
Conclusion: Your Dream Home Awaits
In conclusion, leveraging your parent’s property is a viable solution if you find yourself short on funds for your first home. Opting for the second method – releasing equity and gifting cash – ensures a smoother, less risky transaction for all parties involved.
Remember, I’m here to guide you through every step of this exciting journey. If you have any questions or need personalised advice, click here to get in touch with me. Your dream home is within reach, and at GT Financial Services, we’re here to help you unlock the door to homeownership. Happy house hunting!
